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THE UNEMPTOYE 



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PRESENTED BY 




W. C. GORGAS 

From 

W. C. Gorgas 

Of Panama Canal Fame. Surgeon General U. S. Army 

"The Problem of the Unemployed is the clearest exposition 
of the question I have ever read. I strongly commend it to 
any one interested in the subject." 



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From 

N. O. Nelson 

N. O. Nelson Manufacturing Company, St. Louis, Mo. 

"It will interest every thoughtful reader who gets it in hand. 
Even the fiction reader will like it for a change." 

N. O. NELSON. 



From 

George Foster Peabody 

Of the Peabody Fund 

"I find myself greatly impressed with the notable value 
of the book." 

GEORGE FOSTER PEABODY. 







R. S. LOVETT 

From 

R. S. Lovett 

Chairman of Board, Union Pacific Failway Company 

"I have read The Problem of the Unemployed with a great 
deal of interest and profit. It is a valuable contribution to a 
discussion that should engage the attention of every thoughtful 
person." 



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From 

Andrew D. White 

First President of Cornell University 

"I have read parts of The Problem of the Unemployed 
with great interest. I congratulate the author upon what 
seems to me a work calculated to arouse much helpful thought." 

ANDREW D. WHITE. 



From 

Francis I. Du Pont 

Du Pont Fowder Company, Wilmington, Delaware 
"It is clear, scientific and unprejudiced." 

FRANCIvS I. DU PONT. 




FRANK P. HOI-LAND 

From 

Frank P. Holland 

Publisher Farm and Ranch, Dallas, Texas 

"The Problem of the Unemployed analyzes the cause of 
unemployment and poverty and outlines a readjustment * * * 
which will give every worker at all times a job. The book 
deserves a large circulation." 




From 

Herbert Quick 

Editor Farm and Fireside, Springfield, Ohio 

"I read The Problem of the Unemployed with unflagging 
interest from beginning to end. In clearness of statement, 
wealth of illustration and dignity and sobriety of method it 
is a work worthy of the highest praise." 

HERBERT QUICK. 

From 

Hamlin Garland 

The Author 

"I found in The Problem of the Unemployed a clear, sane 
and hopeful analysis of our social conditions." 

HAMLIN GARLAND. 




C. H. INGERSOLL 

From 

C. H. Ingersoll 

Manufacturer Ingersoll Watches 

"Your book gets at the meat of the proposition. To re- 
lieve unemployment it is necessary to create more jobs. I 
wish the book could be read by every manufacturer, merchant 
and business man in the country." 




From 

Lincoln Steffens 

"It is a remarkable book. It answers a question which is 
in everybody's mind. It answers it, I say, and clearly. I 
think many men will be grateful to you for it, as I am." 

LINCOLN STEFFENS. 

From 

Rt. Rev. Chas. D. Williams, D. D. 

Bishop Episcopal Church, Diocese of Michigan 

"It has the advantage, which few books on this subject 
have, of indicating a solution of the problem, i do not see 
how any man with unbefuddled mind can avoid the conclu- 
sions of vour argument. The book is destined to do great 
good." " CHAS. D. WILLIAMS. 




WARREN WORTH BAILEY 

From 

Warren Worth Bailey 

Editor Johnstown Democrat, Johnstown, Pa. Just re-elected to 
Congress 

"I believe it is the very bestjthing alonglthe|line^that has 
yet been printed." 



'^^Wto^ AAt^/Zu^U^ 



From 

F. P. Walsh 

Chairman U. S. Commission on Industrial Relations 

"The Problem of the Unemployed is one of the most sig- 
nificant and illuminating contributions to the economic thought 
of the dav." 

F. P. WALSH. 



From 

John DeWitt Warner 

Ex-Congressman, New York 

"I find it with one exception the clearest and most at- 
tractive discussion of our social and political economy 
since Adam Smith's Wealth of Nations." 

JOHN DeWITT WARNER. 




J. S. RICE 

From 

J. S. Rice 

President Union National Bank, Houston, Texas 

"I have read the book. It is a good thing. I subscribe for 
five extra copies to distribute among my friends." 




From 

R. A. Pleasants 

Chief Justice of Texas Court of Civil Appeals, Galveston, Texas 

"It is not a dry treatise on PoHtical Economy, but a clear 
and forcible argument upon a question of most vital interest 
to society." 

R. A. PLEASANTS. 

From 

Horace Chilton 

Formerly U. S. Senator from Texas 

"The Problem of the Unemployed has proven a very in- 
teresting book to me." 

HORACE CHILTON. 




RUFUS CAGE 



From 
Rufus Cage 

President School Board. Houston, Texas 

"It answers all the questions suggested in the introductory 
cnapter A change is inevitable." 



From 

Edward Osgood Brown 

Justice Illinois Appellate Court 

"To my great pleasure I have at last found time to read 
The Problem of the Unemployed. It is clear, attractive and 
very interesting." 

EDWARD OSGOOD BROWN. 



Prof. J. H. Dillard 

New Orleans 

"It is a splendid book. I like it exceedingly. It is sure to 
receive earnest consideration in the minds of earnest men." 

PROF. J. H. DILLARD. 



THE ANONYMOUS AUTHOR 

As he appeared many years ago when he first became interested in the sub- 
ject indicated by the followmg questions: 

Improvements in labor-saving processes make it easier to 
produce the necessities and comforts of life, then why should not 
such improvements also make it easier for all to obtain and 
enjoy the necessities and comforts of life? 

Why should not the intensity of the struggle for things be 
lessened by inventions which make it less difficult to produce 
things, and why should not life for all of us thereby be made 
less strenuous rather than more strenuous? 

Why should the production of wealth be continually curtailed 
by panics, dull times, and the involuntary idleness of vast num- 
bers of workers, whose constant employment would enormously 
add to the prosperity and wealth of the nation? 

Is there a remedy? If so, does it point toward individualism 
and freedom or toward socialism and slavery? 

Does the remedy require the confiscation of private property, 
or does it admit of compensation in full to all who would other- 
wise be injured by its adoption? 

Must there not be some kini of a readjustment if our civiliza- 
tion is to survive against the forces of increasing want in the 
midst of increasing plenty? Read Lord Macauley's celebrated 
letter written in 1855, which President Garfield said startled 
him like "an alarm bell at night." See page 211, infra. 

THE AUTHOR. 



H. 






The Problem of the Unemployed 

Anoiiymous, 



It demonstrates with mathematical certainty the 
cause of dull times and involuntary idleness. It 
shows why improvements in labor-saving ma- 
chinery fail to increase wages and lessen the 
intensity of the struggle for existence. It 
points to the remedy; a remedy bene- 
ficial alike to employer and employee; 
a remedy which could be adopted 
unthout confiscating private prop- 
erty or even impairing its 
selling value. 



SOLD BY SUBSCRIPTION ONLY 



Second Edition 
A. D. 1915 



Price $1.00 

THE PROBLEM OF THE UNEMPLOYED 
PUBLISHING CO. 

Houston, Texas 



H3/7/ 
.7 



Author's Edition for Private Circulation. 

Copyrighted 1905 by 

J. J. Pastoriza, Trustee, 



Gift 
People's Lobby 
Nov. 2S, 1936 



TO THE WIFE 

WHO, AS COMPANION, COMRADE AND MENTOR, 

FOR MORE THAN TWENTY-FIVE YEARS 

HAS GLADDENED THE HEART 

AND THE HOME OF THE 

AUTHOR, THIS WORK 

IS AFFECTIONATELY DEDICATED. 



PUBLISHER'S NOTE 

The Problem of the Unemployed, though an in- 
tensely interesting discussion of the most important 
problem confronting our civilization, is nevertheless 
a cold-blooded work on political economy, entirely 
devoid of sentiment. 

While it discloses the simple and easily understood 
natural laws which control the distribution of wealth, 
the subject is not confused by advocacy of socialism, 
the single tax or any other so-called reforms. The 
underlying cause of industrial disease is clearly 
pointed out. The remedy which would cure it is 
shown. But the author claims that it is shown for 
the purpose of proving by setting forth the effects 
which would follow its adoption, that his diagnosis 
of the disease is correct. To the statesman and the 
politician is left the task of determining the possi- 
bility and the practicability of securing popular as- 
sent to legislation which would cure the disease. 
Hence liberal-minded people of all shades of econom- 
ic opinion cordially recommend the book as, in the 
language of Mr. Chief Justice Pleasants, "A clear 
and forcible presentation of a question of most vital 
interest to society." 



CONTENTS 

CHAPTER I. 
INTRODUCTOPwY. 

Questions for the Political Economist to Answer. 
CHAPTEPv 11. 

DEFINITIONS. 

Of Wealth, Land, Capital and Labor; and of Rent, 
Interest and Wages. 

CHAPTER HL 

THE NATURE OF INTEREST. 

CHAPTER IV. 
THE NATURE OF RENT. 

CHAPTER V. 

EFFECT OF IMPROVEMENTS. 

In Labor-Saving Machinery and of Progress Gen- 
erally on Rent, Interest and Wages. 

CHAPTER VI. 

THE ALL IMPORTANT QUESTION. 

Why do not Improvements in Labor-Saving Prosesses 
Naturally Increase Wages? 



Contents, 

CHAPTER VII. 
OBSTACLES TO EMPLOYMENT OF CAPITAL AND LABOR. 

CHAPTER VIII. 

EFFECT OF A REAL SCARCITY OF LAND ON RENT, 
INTEREST AND WAGES. 

CHAPTER IX. 

EFFECT OF AN ARTIFICIAL SCARCITY OF LAND ON RENT, 
INTEREST AND WAGES. 

CHAPTER X. 

LABOR'S DEPENDENCE ON CAPITAL. 

CHAPTER XL 
THE WAGE FUND OR PERMANENT WEALTH. 

CHAPTER XII. 
THE DISTRIBUTION OF WEALTH. 

Causes Affecting the Division of Wealth between 

Land Owners on the one hand and Capitalists 

and Laborers on the other hand. Also the 

Law of Rent and Its Corollary, the 

Law of Wages. 

CHAPTER XIII. 
THE DISTRIBUTION OF WEALTH, Continued. 
Causes Affecting the Division of Wealth between 
Capitalists and Laborers, and between Em- 
ployers and Employees. 



Contents, 
CHAPTER XIV. 

THE ULTIMATE REMEDY AND WHY IT SHOULD BE 
CONSIDERED BY THE POLITICAL ECONOMIST. 



CHAPTER XV. 

IMMEDIATE NATIONALIZATION OF LAND, WITH 
COMPENSATION TO LAND OWNERS. 

CHAPTER XVI. 

THE NATIONALIZATION OF LAND, Continued. 

Speculations in Regard to Effects which would flow 

from it, Including its Effect on Labor Unions, 

Trusts and Socialism. 

CHAPTER XVII. 
NATURAL TAXATION. 

APPENDIX. 



CHAPTER I. 

INTRODUCTORY. 

QUESTIONS FOR THE POLITICAL ECONOMIST TO 
ANSWER. 

WHEN the real explanation of any puzzling phe- 
nomenon in nature is discovered, it is gener- 
ally found to be simple and easily understood. This 
does not always insure an immediate admission of 
the truth, however clear and easy of proof the expla- 
nation may be. The mind will not act impartially, 
when biased by previously conceived ideas, or by 
long training in the accepted canons of any art, or 
when warped by self-interest. 

The phenomena of the sail of a ship being seen 
before the hull, of day following night, and of planets 
changing their places in the sky, were studied by 
astronomers for centuries before the simple expla- 
nation was advanced that the earth is round, turns 
on its axis, and revolves about the sun. Yet for 
many years afterwards this theory was disputed in 
all the great institutions of learning in the world. 
Its very simplicity, as well as the powerful influence 
of ecclesiastics, Protestant and Catholic alike, re- 



2 The Problem of the Unemployed 

tarded its acceptance; but finally, from the teach- 
ings of Copernicus, Galileo, Kepler and Newton, the 
beautiful theory of the solar system was made the 
basis of an exact science in place of the jargon which 
had been solemnly expounded as astronomy since the 
days of Ptolemy. 

And so as to the new system of political economy. 
It is possible that an underlying cause, controlling 
the distribution of wealth and accounting for socio- 
logical phenomena which have heretofore baffled 
philanthropists and statesmen, has at last been dis- 
covered, and that from it has been evolved a system 
of political economy as simple and yet as compre- 
hensive as the science which explains the movements 
of the stars. 

Wealth in a civilized community is always pro- 
duced by a combination of land, capital and labor. 
Land furnishes the material, capital the machinery, 
and labor does the work, including the work of plan- 
ning and superintending. Under normal conditions, 
wealth, when produced, is divided among the fac- 
tors entering into its production, a portion of it 
going to land as rent, another to capital as interest, 
and the remainder to labor as wages, the latter in- 
cluding compensation for superintendence and also 
for direction of the use of capital, a service which is 
often performed by the owner of the capital em- 
ployed. 

Land and rent, capital and interest, labor and 
wages are the primary factors to be taken into ac- 
count in the study of the science of political econ- 
omy. Properly defined from an economic standpoint 
these factors are all that need be considered in as- 
certaining the laws which control the production of 



Questions to Be Answered 3 

wealth and fix the ratio of its distribution among 
land owners, capitalists and laborers. If political 
economy is a science, it will not only explain and 
account for the most important of sociological phe- 
nomena but it will also show the bearing of exist- 
ing laws upon such phenomena, and the effect of 
legislative changes which a comprehensive grasp of 
the science may suggest. 

Legislation must be viewed by the political econ- 
omist from a cold and purely scientific point of view, 
without reference to the justice or the injustice of it, 
but solely as to its effect upon the production and 
distribution of wealth. Questions of ethics, of com- 
pensation, of equitable distribution, of the effect of 
popular prejudice and passion in applying to prac- 
tical politics the knowledge obtained from the study 
of political economy, have nothing to do with the 
science itself. Such questions are for the moralist 
and the statesman, not for the student of economic 
science. His work should neither be embarrassed 
nor confused by considerations relating to them. 
Neither should his judgment be biased by interest 
in any so-called reform or by prejudice in favor of 
what future generations may perhaps regard as time 
honored wrongs.* 

It is possible that economic science may point with 
unerring certainty to the necessity of changes in leg- 

*The author while agreeing in the main with the majority 
of those to whom he refers as political economists of the new 
school, disclaims any attempt to reflect the views commonly 
accepted by them. Those of this school who may be disposed 
to criticize some of his positions are reminded that the object 
of this work, as stated on the title page, is simply to show, 
from the cold standpoint of science, the underlying cause 
of involuntary idleness and the failure of wages to keep pace 
with the increasing wealth-producing power of wage earners. 



4 The Problem of the Unemployed 

islation in the interest of an overwhelming majority 
of people, modifying to some extent now accepted 
rights of property and affecting the distribution of 
wealth ; but even so, the timid conservative need not 
be alarmed on this account, nor should he for this 
reason shrink from a thorough investigation of one 
of the most important and interesting subjects of 
human thought. As has ever been the case in the 
progress of the race toward improved social condi- 
tions, such changes as may be found desirable will 
come slowly, periods of reaction following those of 
action, and the losses, if any, accompanying unavoid- 
able readjustments of economic conditions will nec- 
essarily be largely diffused among all. 

It is generally claimed, whether true or not, that 
wages do not keep pace with the wealth producing 
power of the laborer. And not only so, but that the 
disproportion between the total amount of wealth 
produced and the portion of it going to labor as 
wages is becoming more and more marked, as, with 
accelerated ratio, labor-saving inventions increase 
and multiply. Wages of individual members of the 
highly skilled class of workers have risen and are 
undoubtedly higher than ever before. The prizes 
offered for exceptional ability on the part of such 
workers are of dazzling magnificence, and the law of 
the survival of the fittest gives to the child of the 
poor, when highly endowed by nature, an equal 
chance with the child of the rich to win in the field 
of mighty enterprise. The lives of the captains of 
industry and the self-made men of America tend to 
prove that this is true. Still, as is always the case 
with prizes, while all may have equal opportunity to 
strive for them, success can crown the efforts only 



Questions to Be Answered 5 

of the few. As to the overwhelming majority, labor- 
saving processes have not as yet relieved them from 
the necessity of working almost as hard as ever be- 
fore for a bare living, nor does the struggle for ex- 
istence appear to be less intense or the fear of the 
loss of employment less disquieting than when wheat 
was cut with a sickle and the whir of the bobbin was 
heard at every door. 

Is the failure of wages to advance more rapidly 
and the frequent inability of laborers to find employ- 
ment justly attributable to the faults of laborers 
themselves ? The teeming millions, under any condi- 
tion of society, must perform the manual and clerical 
work of the world, and if every one working for 
stated wages were to become a Washington in hon- 
esty and a Franklin in ability and thrift, is it clear 
that the demand for labor would increase thereby? 
The efficiency of the laborer and the amount of 
wealth produced would be increased ; but this is what 
labor-saving appliances have already accomplished 
and what they bid fair to accomplish in far greater 
degree. In many lines of employment the most idle 
and trifling of laborers, with the aid of such appli- 
ances, produce wealth in far greater quantities than 
was possible on the part of the most conscientious 
and intelligent fifty years ago. Why should increased 
efficiency of all laborers through improvements in 
their character and ability any more increase the 
demand for labor and the wages of laborers than 
increased efficiency produced by improvements in 
labor-saving appliances ? 

Is it true that, as population increases, the wages 
of the poorest paid class of labor naturally tend to 
fall to the point at which the laborer can barely sub- 



6 The Problem of the Unemployed 

sist, and that the wages of all other classes tend to 
fall in like proportion? If this is the ease, what is 
the reason of it? It would be natural to suppose 
that the more wealth the working class produced, 
either by the aid of labor-saving machinery, or by 
working more hours in a day, or by greater faith- 
fulness toward employers, the higher would wages 
be for all. Such, however, does not seem to be the 
result. The impression that a labor-saving device, 
by dispensing with the work of laborers, to that ex- 
tent reduces the demand for labor and the wages of 
the laborer, still lurks in the mind of the working 
man; and improvements in machinery which in- 
crease his capacity to produce wealth are dreaded 
and feared, instead of welcomed as the means by 
which his burdens can be lightened and his hours of 
leisure increased. 

If it is true that labor-saving processes do not in- 
crease wages in the same proportion in which they 
increase the laborer's ability to produce wealth, 
where does the increasing difference between the 
wealth which he produces and that which he receives 
as wages go ? Who gets it, and what becomes of it, 
and what is the law which controls its distribution? 

Mr. Carroll D. Wright, formerly United States 
Labor Commissioner, who was usually able to prove 
by figures that social conditions, no matter how bad, 
were better in all respects than ever before, states, 
in "Practical Sociology," that the census of 1900 
showed that 5 per cent, of the workers of the United 
States (about 1,250,000) were involuntarily idle all 
the time. Why is it that in the midst of unlimited 
opportunities for work which unused lots and lands 
afford, such immense numbers of men, willing to 



Questions to Be Answered 7 

work and begging for work, should be unable to ob- 
tain it? 

In 1880, tenants operated 25 per cent, of the farms 
in the United States; in 1890, 28 per cent.; in 1900, 
35 per cent. ; in 1910, 37 per cent. Is it necessary 
that others should own the land on which the real 
farmer toils, or that the number of land owning 
working farmers in America should steadily decrease 
as wealth increases? 

The census shows" that the average amount of 
wealth in the United States in 1850 was $808 for 
every man, woman and child, while in 1900 it was 
$1,243, and in 1914 about $1,800 — a six fold increase. 
If capital and labor can thus produce wealth in such 
immensely increasing quantities, why is it that in a 
free and enlightened country the average wages of 
the great majority of wealth producers are still little 
more than barely sufficient for the support of life, 
while many men, in a single lifetime, accumulate 
millions, tens of millions, and even hundreds of mil- 
lions of dollars ? Mr. Frank A. Fetter, Professor of 
Political Economy at Cornell University, in "Prin- 
ciples of Economics," states that 1 per cent, of all the 
families in the United States own more wealth than 
the remaining 99 per cent. Shall this apparently in- 
creasing inequality in the distribution of the wealth 
in this country be wholly attributed to the superior 
virtues of men of the class of Rockefeller, Schwab 
and Carnegie, or to the maladministration of the 
forces of government? And if to the latter, in part 
at least, in what respects are the powers of govern- 
ment maladministered ? 

In England today, where wages are higher than in 
most of the countries of Europe, and where labor- 



8 The Problem of the Unemployed 

saving appliances are utilized to the fullest extent, 
it is claimed that one-fifth of the population is "con- 
demned to a poverty v/hich destroys them physically 
and spiritually, * * * they do not have enough to eat, 
are inadequately clothed, sheltered and warmed in a 
rigorous climate, and are doomed to a moral degen- 
eracy which puts them lower than the savages in 
cleanliness and decency/' Commenting on this state- 
ment from the "People of the Abyss," by Jack Lon- 
don, and referring to the fact that Mr. London's con- 
clusions are supported by those of Mr. Charles Booth, 
Mr. B. S. Rountree and others who have investigated 
the matter, The Public, published in Chicago, says: 
"College settlements, missions, charities and 
what not can make no perceptible impression 
on the rising tide of poverty accompanying in- 
crease of population and produced by an arti- 
ficial scarcity of land. *In the nature of things,' 
says Mr. London, *they cannot be but failures. 
They are wrongly though sincerely conceived. 
They approach life through a misunderstanding 
of life, these good folks. * * * The very money 
they dribble out in their child's schemes has 
been wrung from the poor.' Shall thrift be 
preached? *It is sheer nonsense,' he replies, 
'to preach thrift to the one million eight hundred 
thousand London workers who are divided into 
families which have a total income of less than 
$5.25 per week, one-quarter to one-half of which 
must be paid for rent.' " 
We seem to be approaching similar conditions in 
the United States. Thus, a correspondent of The 
Outlook, after describing the dreadful homes in 
which the striking packing-house employes of Chi- 
cago were living, says : 

" *I have never had a child come to me for 
treatment,' said a local doctor, *who has not had 



Questions to Be Answered 9 

enlarged glands of the neck. These glands are 
meant to absorb poisonous matter. These little 
children live in homes so foul and overcrowded, 
they take in so much poison that their glands 
are overworked. They suffer, too, from under- 
feeding, and hence anaemia. In the blood of a 
healthy person, the "count" should be between 
85 and 95. Among my patients, I rejoice at 
finding the count of 50. I have found it as low 
as 28.' 

"In such homes, it is hard for family life to 
keep wholesome and pure. *Any man who has 
a family of little children here,* said a Polish 
doctor, 'simply cannot keep it alive on the un- 
American wage of six or seven dollars a week, 
especially since the cost of living is rising so 
high. To keep the home alive on such a wage, 
the mother, too, must work in the yards, and 
sometimes she not only works by day, but comes 
home at night to cook for the six boarders v/ho 
are crowded with the family into the small four 
or five room flat. With no money for wholesome 
recreation, and with the home so overcrowded 
with boarders, it is natural enough that drink- 
ing is so heavy, and that in many cases immi- 
grant wives and daughters grow inured to sex- 
ual immorality — or rather unmorality.' The 
moral is — don't have families." 

The late Thorold Rogers, professor of political 
economy of Oxford University, and for many years 
a member of parliament, in his "Six Centuries of 
Work and Wages," shows that the golden age of the 
English workingman as regards wages was back in 
the fifteenth century, 500 years ago, when he re- 
ceived the equivalent of the carcass of a sheep for a 
day's work of eight hours. The eight-hour day was 
then universal; paupers were unknown, and such a 
thing as an able-bodied man wanting work and un- 



10 The Problem of the Unemployed 

able to find work was unheard of in England. Now 
8 per cent of its population in normal times are 
paupers, and over one-fifth of its people do not have 
enough to eat and are insufficiently warmed, clothed 
and sheltered. Yet food, fuel, clothing and shelter 
can be produced in greater abundance now and with 
far less expenditure of human labor than ever before. 

In the fifteenth century a man could spin five 
hanks of twist in a week; today a man and a boy 
spin one thousand hanks in the same length of time. 
Wheat was garnered with a sickle and threshed with 
a flail; now the reaper and the threshing machine 
increase the output of harvest hands twenty fold. 
Nails were then forged by blacksmiths one by one ; 
now they are so cheap that carpenters can not afford 
to pick them up when dropped. And so in hundreds 
of other instances labor saving appliances have in- 
creased in like degree the efficiency of labor as well 
as the ease and rapidity with which the necessities, 
comforts and luxuries of life can be produced. 

But inventions which save labor have not as yet 
saved the laborer. They have not as yet made it 
easier for him to obtain the primary necessities of 
life. His children, often denied the child's birth- 
right to play in the sunshine and under the green 
trees, by the millions toil long and dreary hours in 
mines and factories, his women folks, in constantly 
increasing numbers, compete with men for work 
which men alone should do. And the employer, no 
matter how kindly disposed, can seldom afford to pay 
higher wages. He, too, has to stand the pressure 
of the upper and nether millstones of our murderous 
industrial system, which grind alike the average em- 
ployer and the average employe. And so progress in 



Questions to Be Answered 11 

the industrial arts as to multitudes of average men 
is now a hollow mockery if not a blighting curse. As 
to them, inventions have not lessened the intensity 
of the struggle for existence. They are the victims, 
not the beneficiaries, of steam and electricity, the 
mighty forces of nature tamed by man and now often 
used in the enslavement of fellow man. 

We are always suffering chronic dull times ; duller 
some times than at other times, but more or less dull 
all the time. We grow too much cotton, though mil- 
lions of people are insufficiently clothed. We pro- 
duce too much food, though half the population of 
the world is insufficiently fed — shoemakers wanting 
work and millions wanting shoes. And so in every 
line of industry men are out of work, while other men 
need the products of their work, which products they 
would freely buy but for their own involuntary idle- 
ness. Why this constant derangement and clogging 
of the wheels of industry? What, if any, are the 
obstacles to steady employment for all who want 
steady employment? 

Why do not the rewards of labor, both as to the 
average employer and the average employe, keep 
pace with constantly accelerating progress in the 
arts and sciences? 

Why are men willing to work so often unable to 
find work, and this, too, in the midst of abundant 
unused natural opportunities for work? 

Why is it that in every great and populous center 
of wealth and civilization a submerged class is found 
whose condition, as was stated by Huxley, is more 
deplorable than that of man-eating South Sea Island 
savages ? 



12 The Problem of the Unemployed 

Is it not probable that the evils referred to in 
these questions are caused by an improper applica- 
tion of the forces of government, and might they not 
disappear if these forces were understood and prop- 
erly applied? 

Is it not true that our social as well as our physical 
relations are controlled by natural laws ? If so, does 
legislation in harmony with the natural law tend 
toward individualism and freedom, or toward social- 
ism and slavery? 

In an age in which the phenomena of the physical 
universe are studied with great eagerness and suc- 
cess, the indifference everywhere shown to a knowl- 
edge of the laws which control the social relations 
of men to one another and the earth on which all 
must live is a remarkable psychological fact. How 
strange that we should be more interested in the 
movements of stars than in knowing the cause of 
appalling want in the midst of constantly increasing 
plenty. When strikes, lockouts, boycotts and the 
hatred and passions engendered by the present 
wasteful system of industrial warfare shall have 
passed away, what then? 

Why is it that so few sociological experts attempt 
to answer, even in their own minds, the questions 
propounded in this chapter ? Is it because the ques- 
tions are uninteresting? Is it because they do not 
pertain to the science of political economy? How 
can political economy be other than a dull and profit- 
less study if questions within its scope, vitally af- 
fecting the well being of mankind, are ignored? 



NOTE: — It has been said that the real interest of this 
hook to the average reader begins with Chapter VI, page 
69. The person who is willing, however, to really study 
the science of political economy will be interested in this 
and the following three chapters. 



CHAPTER II. 

DEFINITIONS OF WEALTH, LAND, CAPITAL AND LABOR ; 
AND RENT, INTEREST AND WAGES. 

DEFINITIONS of the terms used in the study of 
any science are of the greatest importance; 
and, as is often the case, the scientific definition is 
sometimes more and sometimes less comprehensive 
than the popular one. This is especially the case in 
political economy, since its terms are necessarily 
those loosely used in ordinary conversation. It is all 
important, however, that the definitions given should 
fit, for unless the term employed in any instance 
means the same in all instances of like character, 
clearness either of thought or of statement is impos- 
sible. Definitions which do not stand this test must 
be rejected. It is, therefore, first in order to define 
wealth and the factors which control its production 
and distribution. The distinction between these 
definitions and the customary meaning of the words 
defined must always be borne in mind. 

WEALTH is any material thing produced by 
human toil which gratifies a human desire, and noth- 
ing can be regarded as wealth in an economic sense 
which does not come within the scope of this defini- 
tion. Wealth includes food, clothing, buildings, 
machinery, ships, and all improvements produced by 
labor. It is always something of sea or l^nd which 



14 The Problem of the Unemployed 

has been molded, or fashioned, or transported, by 
the application of human skill and industry. It does 
not owe its existence to legal enactments, though its 
price, or exchangeable value, may be enhanced, im- 
paired or destroyed by legislation, yet the substance 
itself constituting wealth can never be blotted out 
of existence by the mere fiat of law. A book is 
wealth, as defined above, but not the copyright, the 
existence of which depends upon legislation, and 
which can be made valueless by a mere legislative 
act. The copyright is a special privilege conferred 
by law, and while the repeal of this privilege, which 
means the repeal of the right to dictate the terms of 
publication and sale, might make the owner of the 
copyright less wealthy, according to the popular 
meaning of the word, the amount of wealth in the 
world would not be affected thereby. This is also 
true with respect to patent rights and all other spe- 
cial privileges founded on governmental law. 

The mere fact that a thing may be bought and sold, 
and that its owner may obtain wealth in exchange 
for it, does not bring it within the definition of 
wealth. Shares of stock in companies and corpora- 
tions do not constitute wealth as here defined. A 
certificate of stock simply shows that the holder is 
the owner of a definite undivided interest in the 
tangible property of the corporation to which it re- 
lates, and in the special privileges which the corpo- 
ration may enjoy. So, also, bonds and promissory 
notes, whether secured by mortgages or not, do not 
come within the definition of wealth. They are but 
promises to repay wealth previously borrowed. In 
respect to them as well as to stock in companies and 
corporations, the location of the tangible wealth to 



Definitions 15 

which they refer may be thousands of miles distant 
and subject to the jurisdiction of a government 
foreign to that under which the owner lives. If these 
evidences of ownership and promises to pay were 
destroyed, or rendered valueless by the repeal of 
special privileges, or by other legislation, the amount 
of real wealth in the v/orld would not be thereby les- 
sened one iota. The things to which they refer would 
still remain unchanged. 

Money in itself, either on hand or in bank subject 
to the owner's order, is not wealth, although coin 
considered as bullion is wealth, its value as such de- 
pending upon its weight and fineness. Money simply 
lepresents commodities, that is to say, wealth, pre- 
viously exchanged for it, and for which it can at 
any time be re-exchanged, or exchanged for other 
commodities at the owner's option. Sound money is 
like a warehouse receipt. It evidences the fact that 
the owner of the money has in effect deposited in the 
great warehouse of the world, commodities of a cer- 
tain value, for which he has been given a receipt; 
that on presentation of this receipt in the world's 
clearing house, he will be entitled to have restored 
to his possession the articles originally given in ex- 
change for it (subject to fluctuations in prices) or 
an equivalent in other commodities. 

It is possible to conceive of trade and exchange of 
commodities being carried on without money or any 
circulating medium, just as a game of poker or any 
other betting game can be played without money, or 
emblems, such as "chips," representing the amount 
of the stakes. This could be done by means of a pos- 
sible, though extremely complicated and expensive, 
system of bookkeeping conducted by a bureau of the 



16 The Pi'ohlem of the Unemployed 

government, in which would be noted A's sales to B 
and B's to C and C*s to D and D's to A, thus closing 
the circuit and cancelling the accounts between all 
parties as effectually as a fifty dollar bill passing 
from one to the other might do it. But, as in the 
game of chance, it is much more convenient and ex- 
peditious to use emblems representing the amounts 
bet than to note them down in writing, so in carry- 
ing on the trade of the world, it is much easier and 
more economical to use tokens, i. e., money, than to 
resort to bookkeeping. Money in fact is but a labor- 
saving appliance which dispenses with the vast 
amount of work which would be involved in the bar- 
ter or direct exchange of commodities, or in any sys- 
tem of bookkeeping which might be substituted for 
it; and while money in this sense is doubtless sus- 
ceptible of improvement in matters pertaining to its 
issuance and volume, and affecting its utility as the 
measure of values — improvement which would save 
waste and increase production — yet all this would 
only amount to a saving of labor, and in the end 
would have no more effect upon the production and 
distribution of wealth than any other improvement 
in a labor-saving device. 

To have a clear conception of the lav/s which reg- 
ulate the production and distribution of wealth, one 
must be able habitually to associate sound money 
with tangible things and commodities. When we 
say that a man has ten thousand dollars in money, 
we must instantly see and realize that what he in 
effect really owns and has in his possession consists 
of two thousand barrels of flour of the value of five 
dollars a barrel, or five thousand pairs of shoes of 
the value of two dollars a pair, or ten thousand yards 



Definitions 17 

of cloth of the value of one dollar a yard, or ten thou- 
sand dollars worth of any of the things to be found 
in the markets of the world. The man who owns the 
money has himself in effect already deposited these 
identical things or the equivalent of them in the 
warehouse of the world's market, just as he may 
have deposited his currency or gold in a savings 
bank ; and, as on presentation of his pass book to the 
bank he can draw out his money in lots to suit, so on 
presentation of his money in the markets of the 
world, he can draw out the identical commodities pre- 
viously deposited by him, or others of equal value, 
in lots to suit. ^ 

We say, for instance, that Farmer A has ten thou- 
sand dollars cash in hand which he saved in ten 
years. This means that his receipts during this 
period exceeded his expenditures by ten thousand 
dollars ; or, in other words, that the value of his de- 
posits of wealth in the markets of the world in the 
form of wheat, cattle, vegetables, etc., exceeded his 
withdrawals of wealth from the same markets in the 
form of clothing, groceries, furniture, implements, 
etc., by ten thousand dollars. It means that at the 
end of the ten years, he had in effect remaining to 
his credit in the great world warehouse, a portion of 
the cattle and things which he had previously de- 
posited there, and that this remainder was of the 
value of ten thousand dollars, for which he received 
from the world's clearing house ten thousand dollars 
in money. The money simply certified that he was 
entitled on its presentation to withdraw, in lots to 
suit, these identical commodities left by him in this 
storehouse and resume possession of them ; or, if he 
so preferred, receive the equivalent of them in other 



18 The Problem of the Unemployed 

commodities. While the wealth which the day la- 
borer or the mechanic or merchant may save and 
accumulate cannot be so readily traced and illus- 
trated as that saved by the farmer, the process, as 
will readily appear on reflection, is precisely the 
same. When we save money we are saving the things 
for which money can be exchanged. 

Improvements on land come within a correct def- 
inition of wealth, including such improvements as 
result from the artificial fertilization of the soil, or 
the breaking of the prairie sod, or the clearing away 
of the primeval forest. Wealth does not include coal 
beds and mineral deposits, but it does include im- 
provements used in connection with them to the 
extent to which the shaft, the tunnel and the appli- 
ances for reaching and bringing to the surface the 
coal or the ore, represent the application of human 
toil and skill. Wealth also includes domestic ani- 
mals, since human labor and skill to a greater or less 
extent are employed in raising and making them 
useful to mankind. 

Wealth in the sense here used may be produced 
without making any physical change in the object 
itself to which it relates. This is effected by a change 
in its position or in its relations to other objects. 
One hundred bushels of wheat in the hands of a 
farmer in the West is worth, say, eighty dollars. By 
means of facilities furnished by capital and the ef- 
forts of labor applied by teamsters, railroad em- 
ployes, merchants, brokers and others, these hun- 
dred bushels of wheat are transported and placed in 
an elevator in New York with 100,000 bushels of 
other wheat, thus reducing the cost of handling it 
and putting it in closer proximity to consumers. This 



Definitions 19 

wheat is now worth a hundred dollars ; for, by thus 
changing its position, wealth of the value of twenty 
dollars has been produced and added to it just as 
effectually as when, by the application of capital and 
labor to the polishing of a piece of furniture, twenty 
dollars may be added to its value, or in other words, 
twenty dollars more of wealth attached to it. Addi- 
tional values added to any product in this way by 
changing its position or relation to other things has 
the same effect on the production and distribution of 
wealth as when capital and labor are applied to mak- 
ing or producing the thing itself. It is more con- 
venient and accurate, however, to refer to the 
change thus made as additional wealth produced and 
added to the article in question than as additional 
values added to it. 

Wealth, under some circumstances, may also be 
produced by the so-called speculator who buys sur- 
plus products when cheap and holds them for a fu- 
ture rise in prices, provided the "cornering" of the 
market is not attempted. Thus, the buying of the 
farmer's wheat or cotton as soon as it is raised, and 
holding it with the expectation of its advancing in 
price before the next crop matures, tends to equalize 
prices and to prevent the sale of products at abnor- 
mally low prices when first marketed, and the waste 
thereby resulting. 

In general, neither land nor any material thing as 
it lies untouched in the great storehouse of nature is 
wealth, but it becomes wealth after it has been oper- 
ated upon and placed, by the hand of man, in a posi- 
tion or condition in which it can minister to his 
wants and wishes. This, then, is a correct and com- 
prehensive definition of wealth, one easily under- 



20 The Problem of the Unemployed 

stood and applied, and which means the same thing 
under all circumstances, viz : Wealth is any tangible 
thing which gratifies human desires, the raw ma- 
terial of which comes from the earth, and which 
owes its changed condition to human effort. In an 
economic sense, nothing else is wealth. It is to those 
things which come within this definition of wealth 
that the science of political economy applies. 

LAND includes all material things which do not 
consist of wealth as defined above. Land is the ma- 
terial on which and out of which wealth is produced. 
It includes all the raw material in the great store- 
house of nature, which has been furnished for the 
use of mankind. Embracing the surface of the earth, 
it cannot be increased or decreased to the extent of 
a single square yard. Portions of the earth's surface 
covered by water, for instance, may be drained or 
filled in, and wet land changed into dry land, but 
improvements of this character generally constitute 
v/ealth and must be considered separate and apart 
from the site or the surface of the earth which they 
occupy. Land includes the sites on which the rail- 
road tracks and terminals are constructed, on which 
farms are located, and dwelling-houses and factories 
are built. It includes the coal beds and the mineral 
deposits and the undomesticated animals of land and 
sea, and in fact all the products of the earth as they 
lie unused and untouched by the hand of man. 

Wealth is not only produced on land devoted to 
agriculture, but it is also actually produced in far 
greater quantities on land devoted to commerce, min- 
ing, manufacturing and to other business purposes. 
As already shown in defining wealth, it is as accurate 
to say that the wealth of the world is increased by the 



Definitions 21 

work of merchants and brokers as that it is increased 
by the work of farmers and mechanics. The city lot 
on which the work of exchanging commodities is 
carried on is as much devoted to the production of 
wealth as the land on which the commodities them- 
selves are raised or manufactured. Every one of the 
acts in the ordinary course of business by which 
wheat, for instance, is transported to the mill, ground 
into flour, baked into bread, and placed in the hands 
of the consumer, adds a certain amount of wealth to 
it, the aggregate of which usually exceeds by many 
fold the value of the original product. One of the 
most important acts by means of which a few bushels 
of wheat in the hands of a farmer in Iowa are finally 
exchanged for a pair of shoes in the hands of a shoe- 
maker in Massachusetts, may be performed by a 
broker in an office on Wall Street. Wealth thus pro- 
duced and added to the wheat by this broker operat- 
ing on land in Wall Street does not differ in effect from 
the wealth produced by the farmer in raising the 
wheat on land in Iowa. Owing to the favorable loca- 
tion of Wall Street land for the purpose, great num- 
bers of such exchanges are effected upon it annually, 
involving enormous amounts of products and adding 
to them in the aggregate enormous sums of wealth. 
The wealth thus actually produced on a single city 
lot may exceed the wealth produced on a thousand 
farms in Iowa. Men will pay more for the privilege 
of producing wealth on such a lot than the value of a 
thousand farms in Iowa, since a lot of this kind often 
sells without reference to improvements for more 
than the price of a thousand farms. Thus, land on 
Wall Street, exclusive of improvements on it, has 
sold at the rate of over twelve millions of dollars per 



22 The Problem of the Unemployed 

acre, many an acre often being worth more than a 
thousand farms. 

It is thus seen that the importance of the factor of 
land in fixing the ratio of the distribution of the 
products of labor does not depend upon area but upon 
value ; nor does it lie so much in land devoted to agri- 
culture as in land devoted to business, manufactur- 
ing, mining, and speculative purposes, including rail- 
road rights of way and terminals, the aggregate 
value of all of which in the United States is now 
many times greater than that of all lands in actual 
cultivation, exclusive of improvements on them. In 
Greater New York, for instance, the tax assessment 
of 1914 shows that the value of the land alone, exclu- 
sive of all improvements upon it, is over four billion 
dollars. It is estimated that the land values of that 
city equal the land values of all the land in crop culti- 
vation west of the Mississippi river. In this connec- 
tion it is interesting to note that buildings and im- 
provements on land in New York City are assessed 
at less than two billion dollars, or but little over half 
as much as the land alone. 

CAPITAL is wealth used to produce more wealth. 
While all capital is wealth, all wealth is not capital. 
It is not difficult to draw the line marking the differ- 
ence between capital and wealth, since it is sufficient 
to say that wealth which is not employed in the pro- 
duction of more wealth is not capital, while all wealth 
thus employed is capital. An axe in the hand of a 
laborer is capital, as much so as a dredging machine 
costing a hundred thousand dollars. 

Capital includes all material instrumentalities, 
however simple or complex, coming within the defi- 
nition of wealth, which are used in the production 



Definitions 23 

of more wealth. Capital is something, the use of 
which saves labor, something which makes labor 
more effective in the production of wealth. It is in 
reality stored up labor. In the case of the manufac- 
turer, his machinery and the buildings in which it 
is operated, are capital; so are the raw materials 
and manufactured products which he finds it expe- 
dient to carry; so is also the money which he may 
have on hand, according to the definition of money 
already given. In the case of the farmer, capital 
includes his farm buildings, agricultural implements 
and livestock, and provender and food carried from 
one harvest to another. In the case of the merchant, 
it includes his stock of merchandise and the building 
needed for his business. 

Capital is always wealth in the form of some 
labor-saving appliance, or wealth so used as to save 
labor. The capital, for instance, constituting the 
merchant's stock of goods, is used as effectually in 
the saving of labor as capital in the form of any 
labor-saving machine. The accumulation at a place 
convenient of access to consumers of the goods con- 
stituting his stock in trade saves the enormous waste 
of labor which would otherwise be involved were 
the producers themselves compelled to journey 
around, seeking purchasers for their surplus prod- 
ucts. Wealth invested in a building to house a 
laborer is capital, since the workman cannot work 
and produce wealth without the protection from the 
elements which the building affords; hence such a 
building is wealth used to produce more wealth. 

Capital is the fund from which wages are drawn,* 

♦Capital being the product of labor, and in effect stored up 
labor, it may not be strictly accurate to say that it is the fund 



24 The Problem of the Unemployed 

and since, as will be shown later, capital is in effect 
stored up labor, it is proper and convenient to refer 
to the capital in a community or nation as the wage 
fund of such community or nation. But capital can 
never include land, and no consistent or logical sys- 
tem of political economy can be formulated in which 
land, under any circumstances, is regarded either as 
capital or wealth. 

LABOR is work performed usually with the aid of 
capital upon raw material furnished by land, by 
means of which wealth is produced. Those who do 
this work are divided into two classes, viz : employ- 
ers and employees, the employee, however, being 
often his own employer. Labor is human effort, 
both mental and physical, applied to material things 
for the purpose of producing wealth. When such 
effort is applied simply for the purpose of acquiring 
wealth produced by others, it is not labor within the 
economic meaning of the word, nor does wealth thus 
acquired come within the definition of wages. Labor 
includes work performed upon material which may 
have already become wealth, by means of which its 
value is increased or, in other words, wealth added 
to it. Labor includes the work of the brain in or- 
ganizing, inventing, planning, managing, directing 
and superintending, as well as that of the muscle in 
lifting and tugging. It includes the work of the 

from which wages are drawn. This objection, however, seems 
technical, since employees as a class cannot wait for the pay- 
ment of wages until products are finished and placed on the 
market and sold. Few enterprises could be carried on under 
modern methods but for the previous accumulation of capital 
from which the employee receives his wages as the work pro- 
gresses, although he in effect produces in advance day by day 
the wealth afterward given him in exchange for his labor. 



Definitions 25 

employer as well as the work of the employee, and 
one is as much a laborer as the other. 

Since any kind of a tool is capital, it is perfectly 
accurate to limit the economic sense of the word 
"labor" to work performed with the aid of capital 
in the production of more wealth. While it is also 
proper to limit labor to work which produces or 
increases wealth, this limitation does not exclude 
the work of the merchant or broker or any other 
middle man. It is obvious that work performed, 
for instance, in manufacturing wheat into flour, 
increases the amount of wealth in the world, and is 
labor ; and on reflection, it must appear equally clear 
that the work performed by the merchant or broker 
in selling the wheat or the flour adds to its value and 
in effect adds wealth to it. Labor also includes the 
work which is often performed by the owner of cap- 
ital in managing the business in which his capital is 
invested and in planning the application of capital, 
by means of which he is enabled to enjoy a larger in- 
come than if, like other capitalists, he simply loaned 
capital at interest to some one else who would per- 
form the labor involved in the management of it. 
Even the exercise of judgment and discretion on the 
part of a capitalist in buying stock in a wealth-pro- 
ducing company or corporation may often come 
within the economic definition of labor, for the per- 
formance of which wages are paid. 

The labor of employers, in the management and 
direction of capital which they own or control, is as 
much devoted to the production of wealth as that of 
mechanics and self -employing farmers. It is simply 
a kind of skilled labor. Wages received for service 
of this sort are often much higher than those re- 



26 The Problem of the Unemployed 

ceived by laborers working for stated sums. Such 
wages, however, are contingent on the success of 
enterprises. If losses and failures could be estimated 
it is probable that the average wages of employers 
would not be found to be excessive, as compared with 
those of employees. 

The work of servants who simply minister to the 
comfort and ease of employers is not always directly 
instrumental in the production of tangible things 
coming within the definition of wealth, and is not 
labor in the economic sense of the word. Neither is 
work performed for the purpose of acquiring wealth 
by theft, or by combinations in restraint of trade, 
or by means of special privileges, or in any other 
manner of like character, labor in the economic sense 
of the word. 

ECONOMIC RENT is what is paid for the use of 
land, without regard to improvements on it or 
anything done to make it available for use. It is 
what capital and labor pay for the privilege of pro- 
ducing wealth from the raw material of nature, 
which is land, as previously defined. It is what is 
paid for access merely to the storehouse of nature. 
Since neither capital nor labor can be employed 
for a single instant without the use of land, rent may 
properly be considered the price paid for the oppor- 
tunity of employment. A royalty of so much per ton 
for the privilege of sinking a shaft and producing 
wealth in the form of coal, available for use, is eco- 
nomic rent as here defined. 

Rent may be paid annually, or it may be paid in 
advance in the form of purchase money expended 
for land. In either event, it is what is paid for the 
privilege of access to land, and the result as to the 



Definitions 27 

production and distribution of wealth is the same. 
This is also true, even though the land owner and 
the capitalist and the laborer be united, as often 
happens, in the same person. 

Ground rent, as known in England and subject to 
which most of the buildings in the cities of that 
country have been constructed, comes within the 
definition of rent. There is a wide difference be- 
tween the economic and popular meaning of the 
word rent. Rent in its popular meaning includes 
what is paid for the use of buildings and improve- 
ments as well as what is paid for the use of the land 
on which they are located. The additional income, 
however, which an owner obtains on account of im- 
provement on the land is not economic rent, but 
interest received for use of the capital which such 
improvements represent. 

Hence in the case of improved real estate, the in- 
come which the owner gets from it, over and above 
interest on the value of the improvements and an 
allowance for renewals, insurance and repairs, is 
rent. Thus, suppose the improvements consist of 
a building worth ten thousand dollars and that in- 
terest on an investment of ten thousand dollars at 
the rate percent prevailing in the locality where the 
property is situated, together with the cost of keeping 
the building insured and renewed, amounts to a 
thousand dollars annually, and that the entire prop- 
erty, including the land, rents for two thousand 
dollars a year. There is thus a difference of about 
a thousand dollars between the interest on the ten 
thousand dollar improvement plus cost of insurance, 
repairs and renewals, and the total income of two 
thousand dollars received from the property. This 



28 The Problem of the Unemployed 

difference is what the owner gets for the use of the 
land alone, and it constitutes the rent of the land 
according to the meaning of the word as used in 
political economy. In this instance, a thousand 
dollars is annually paid for access to the land. With 
increase of population, the income from this prop- 
erty may reach four thousand dollars a year, without 
the expenditure upon it of any additional capital; 
if so, the price for the use of this land would rise 
from a thousand to three thousand dollars a year. 

The following illustration shows what rent sig- 
nifies when the land owner, the capitalist and the 
laborer are combined in the same person. Suppose 
potatoes are grown by two working farmers with- 
out assistance from other laborers, one of whom, 
Farmer Near, owns the land nearer the city, and 
the other. Farmer Far, owns the land farther away. 
Farmer Near raises and delivers 1,500 bushels, for 
which he receives $750. Farmer Far works just as 
hard, but being compelled to spend much of his time 
in hauling his potatoes nine miles farther to market, 
he only raises and delivers a thousand bushels, for 
which he receives but $500. Notwithstanding the 
difference in the incomes of these two farmers, one 
receives no higher wages in an economic sense than 
the other. Each, with respect to the potato-raising 
enterprise in which he is engaged, is a capitalist, 
a landlord and a laborer. Both have probably about 
the same amount of capital represented by buildings, 
tools and teams, but Farmer Near's interest as a 
landlord is much greater than Farmer Far's, his 
land being worth, perhaps, many times as much as 
that of Farmer Far's. The difference in the incomes 
is not a difference in wages, but results solely from 



Definitions 29 

the fact that Farmer Far receives in effect $250 
more rent per annum from his land than Farmer 
Far receives from his. 

INTEREST is what is paid for the use of wealth. 

WAGES is what is paid for service rendered by- 
labor in producing or attempting to produce wealth. 
Interest is the share of the product going to capital ; 
wages is the share going to labor. In an economic 
sense, wages includes profits, since the word profit 
in popular parlance means interest on a compara- 
tively small capital plus the wages of an employer 
or highly skilled laborer. Thus, a man of more 
than ordinary ability, by the use of say, ten thousand 
dollars of capital in some wealth-producing enter- 
prise, may secure an income of ten thousand dollars 
a year ; but the principal factor which brings about 
such a result is not his capital of ten thousand 
dollars, but its combination with his mental effort, 
or, in other words, highly skilled labor, as heretofore 
referred to. Wages, in an economic sense, is what 
he receives over and above interest at the prevailing 
rate on the ten thousand dollars of capital. Say five 
hundred dollars a year be deducted for interest, then 
there would be left nine thousand five hundred dol- 
lars for wages, it being assumed that no part of the 
income is from rent or from the fruits of monopoly 
or special privileges, as will be hereafter explained. 
This sum of nine thousand five hundred dollars a 
year for wages may be excessive ; if so, it must never- 
theless be regarded simply as high wages paid for 
skilled service. The fact that such services may 
be overpaid, that the merchant, the broker or the 
manufacturer may receive as wages in payment for 
his services more of the wealth produced than he 



30 The Problem of the Unemployed 

would get under a less wasteful system of produc- 
tion and distribution, say, one founded in part on 
voluntary co-operation, does not require the crea- 
tion of any additional term to fit the case. 

Wages and profit, therefore, in an economic 
sense, are often synonymous terms, and because both 
represent the share of wealth which goes to labor, 
it is immaterial whether the portion which labor 
receives as its share is called wages or profit; the 
result, so far as the other portion which goes to land 
is concerned, is the same. Since labor covers every 
character of service instrumental in the production 
of wealth, wages is a term broad enough to include 
the entire product of any wealth-producing enter- 
prise which does not go to capital as interest, or to 
land as rent, and the word rent is broad enough to 
include all which goes to land. To attempt to draw 
additional distinctions and subdivisions would only 
result in needless confusion of thought. 

Wages includes not only the salary of the bank 
president and the per diem stipend of the hod car- 
rier, but also all of any person's income from any 
wealth-producing enterprise followed by him, no 
matter how great such income may be, which is not 
attributable to rent and interest, and not within the 
exceptions hereafter referred to. By a wealth-pro- 
ducing enterprise, however, is meant one which actu- 
ally increases the wealth of the world, and not one 
which merely draws to those interested in it wealth 
produced by others. 

To summarize: Wealth is a tangible thing pro- 
duced by human labor, which gratifies a human de- 
sire; land furnishes the material from which and 
the place on which wealth is produced ; capital fur- 



Definitions 31 

nishes the machinery and labor does the work ; rent 
is the portion of the product which goes to land, 
interest the portion which goes to capital, and wages 
the portion which goes to labor. The portion of the 
product sometimes diverted by combinations in re- 
straint of trade, and various forms of special privi- 
lege, comes within exceptions to the general rule. 
Such exceptions, while reducing the amount to be 
distributed, do not affect the ratio of the distribu- 
tions among the factors of production. 



CHAPTER III. 

THE NATURE OF INTEREST. 

THE causes which affect rent, interest and wages 
can be traced under the most simple as well as 
the most complex conditions of society. To illustrate 
this, let it be assumed that from the dawn of civiliza- 
tion, personal rights were safeguarded by custom 
and law, and that, under such conditions, the primi- 
tive man, naked and with no tool or implement, 
waded into the sea and dug clams with his unaided 
hands. Clams became wealth as soon as detached 
from land. Once in his hands, a clam was a tangible 
thing produced by human effort which gratified a 
human desire. It was wealth according to the 
economic definition of the word. Here labor was 
applied to land, but the factor of capital was missing. 
Wages absorbed the entire product, none of the clams 
being given to any landlord as rent nor to any cap- 
italist as interest. 

Let it be assumed that capital first appears in the 
form of a labor-saving device with which to move 
the sand which covers the clams, some one, after 
months of toil with sharply pointed stones, having 
made a wooden shovel, by means of which twice as 
many clams can be produced in a given time. After 
shovels have come into general use, there will still be 
people in the community, including the young just 
old enough to work and others too ignorant or too 
shiftless to make shovels for themselves, who will 



The Nature of Interest 33 

nevertheless want to use them. One of this class 
naturally tries to borrow a shovel, and perhaps 
expects to get the use of it for nothing. The owner, 
however, thinking of the self-denial practiced in 
making the shovel, refuses to surrender the use of 
it without compensation ; and justly so, since to give 
gratuitously the use of a thing confers as great a 
benefit as the giving the thing itself. He therefore 
demands for its use one-fourth of the clams gathered 
with it. The borrower, knowing that he can pay this 
and still have more clams as the net fruits of his la- 
bor than if he gathered them without using a shovel, 
agrees to these terms, and in doing so he in effect con- 
sents to the payment of this rate of interest. The 
product, the clams constituting the wealth produced, 
will now be divided between capital and labor. Cap- 
ital gets one-fourth as interest, and labor the other 
three-fourths as wages, none of the product, however, 
going to land as rent. The arrangement is mutually 
beneficial. The tool maker is rewarded for his indus- 
try and self-denial, and stimulated to renewed activ- 
ity in making shovels, while the laborer, by the aid 
of capital, makes higher wages than would be possi- 
ble without it. This might not be the case, however, 
if land received a portion of the product as rent. 
But the landlord has not yet appeared. 

Another industrious member of this primitive 
community builds for himself a house. Others who 
would like to live in houses like it are unwilling to 
practice the industry and economy involved in build- 
ing them. This class, as also the juniors just becom- 
ing of adult age, will remain without the ownership 
of such houses after others in the community have 
supplied themselves with them. A house, like any 



34 The Problem of the Unemployed 

other kind of capital, is also a labor-saving device, 
and is useful in the production of wealth. It is located 
near a spring of water, and convenient to the sources 
from which food can be obtained, and thus saves the 
labor and time involved in seeking a distant cave or 
hollow tree for protection from the storms. The 
warmth and shelter and opportunity for rest and 
recuperation which it affords enables its occupant to 
work to greater advantage and produce more wealth, 
and thus make higher wages than would be possible 
without it. After the industrious and thrifty have 
supplied themselves with houses, why should one 
already owning his own house exert himself to obtain 
a surplus house which he cannot use and for which 
the homeless ones have nothing to give in exchange ? 
What is the motive for further industry and self- 
denial on his part in the house producing line? With- 
out a motive for exertion, and a strong one, too, he 
will cease to be industrious and frugal. It is absurd 
to suppose that he will continue to toil and sweat in 
the production of houses which cannot be sold, unless 
he is to receive compensation for his labor in some 
other way. To give one the free use of a house or 
shovel, or the free use of any other article of wealth, 
is equivalent to donating to another the product of 
one's own labor, and placing the idler and the spend- 
thrift on an equal footing with the industrious and 
the capable. The owner of the surplus house, there- 
fore, charges a price for the use of it. This price 
the non-owner gladly pays, if for no other reason 
than that the use of the house enables him to produce 
more wealth and retain a greater portion of it as 
wages, just as in the case of borrowing the shovel. 
What the owner of the house receives for its use is 



The Nature of Interest 35 

interest on the capital invested in building it, noth- 
ing being received as rent, in the economic sense of 
the word, since nothing is received for the use of the 
land on which the house stands. This is because land 
as yet is free. It is still unlimited in quantity in 
proportion to population, there being no greater 
demand for one site than for another. Hence it 
seems to be as natural and as equitable to pay for the 
use of a thing as to pay for the thing itself, and this 
is what interest amounts to. 

Again, suppose by some accident it is next discov- 
ered that aerolites can, by long and tedious grinding, 
be fashioned into axes, and that one man with the 
aid of such an ax can do the work of twenty men 
without it in making useful articles ; also that on an 
average it takes a man three hundred days to make 
an ax. Will the possessor of an instrument of this 
kind, in the production of which so much patient 
industry has been expended, yield the use of it to 
another for nothing? Will he thus give him the 
benefit gratuitously of the three hundred days of 
labor which have been accumulated and stored in the 
ax, representing as it does months of weary toil, and 
the practice, perhaps, of the most rigid economy in 
living expenses? Assuredly not. Otherwise, altru- 
ism would mean making a slave of one's self for the 
benefit of the idle, the weak and the prodigal. But 
the altruist may still insist that the borrower, after 
having by partial payments returned wealth equiva- 
lent to the cost of the ax, should then become the 
owner of it absolutely, and that the seller in good con- 
science ought not in the meantime to charge interest 
on the price, or charge for the use of the ax. This 
means that the owner should receive no benefit or 



36 The Problem of the Unemployed 

premium for the initial industry and frugality prac- 
ticed and privations perhaps suffered in compressing 
into the ax three hundred days of work. If law or 
custom prohibited the owner from charging interest 
and enjoying this premium, why should he not also 
wait for some one else to make an ax and then bor- 
row it himself? Why should he, rather than anoth- 
er, submit to the sacrifice always involved in saving, 
a surplus from one's earnings over and above one's 
expenditures ? 

What this primitive community needed, and what 
all communities have always needed, is a constantly 
increasing supply of capital, without which no mate- 
rial progress can be made, since capital always takes 
the form of labor-saving appliances. Four-fifths or 
more of the wealth produced by any community is 
consumed for the necessities, comforts and luxuries 
of life as fast as produced;* the residue, most of 
which consists of buildings, machinery and material 
things coming within the definition of capital, is 
wholly the result of the ability and willingness of the 
few to live on less than their incomes. No one, rich or 
poor, can do this without exercising some degree of 
self-restraint and self-denial. Were it not for the hope 
of increasing one's income by means of interest, 
there would be little or no motive for practicing the 
economy necessary for the accumulation of capital. 
While the wants of mankind are insatiable, and man 
will cheerfully work for wages with which to procure 
things which can be immediately used or consumed 
in ministering to the necessities and pleasures of life, 

*Carroll D. Wright, in Practical Sociology, estimates that 
the entire wealth of the world about equals its aggregate earn- 
ings for five years. 



The Nature of Interest 37 

there must be a motive beyond this to induce the 
conservation of wages. Thus the accumulation of 
capital calls for more than industry. It calls for fore- 
thought and self-denial, and but for the payment of 
interest, it appears that the reward for the exercise 
of these virtues would to a great extent be lacking. 

In a primitive community, if all were equally 
favored by fortune and equally endowed morally, 
mentally and physically; if all had precisely the 
same tastes and inclinations, and were alike in every 
particular ; if no one had any advantage over another 
on account of the land which he occupied, then there 
would be no such thing as interest. All would pro- 
duce and save alike ; all would have the same amount 
of wealth, and no one would have occasion to buy 
from another on credit. While one man was storing 
his surplus wealth in an ax, another would be storing 
his in something equally desirable ; if the latter bor- 
rowed the ax, he would have something equally valu- 
able to loan the ax owner in exchange for it. But in 
such community, as in all communities, some are 
weak and some are strong; some idle, some indus- 
trious ; some selfish, others generous ; some are provi- 
dent and others improvident. All have different 
tastes and inclinations, while there are ever arriving 
new generations possessed of no wealth or capital 
whatever, and who have had no opportunity of accu- 
mulating it. Hence, it seems equally clear that the 
payment of interest is founded on the diversity of 
human tastes and inclinations and the inherent 
differences in human capacities. 

When one borrows a thousand dollars, he is really 
borrowing the things which he obtains in exchange 
for the money. This is evident from a clear under- 



38 The Problem of the Unemployed 

standing of what money really is, as already 
explained. When the borrower pays the debt, he is 
in effect returning the things borrowed. Thus, I 
wish to engage in business as a merchant. I need so 
many dozen pairs of shoes, so many bolts of cloth, so 
many sacks of flour, and quantities of other articles, 
constituting a stock, of general merchandise. I have 
neither the goods nor the money with which to pur- 
chase them. I borrow from a friend, however, a 
thousand dollars to be used in buying the goods 
which I need. This means that I have obtained from 
my friend what is equivalent to a warehouse receipt, 
calling for a thousand dollars' worth of any of the 
infinite variety of commodities stored in the great 
warehouse of the world's markets. When I borrow 
the thousand dollars, my friend in effect gives me an 
order for the goods which I need in my business. 
When I pay the debt with interest, I am in effect 
returning these same goods to him, with payment 
for the use of them, since I supply him with the 
means of obtaining them or other commodities of 
equal value from the same warehouse. Hence, in the 
complicated conditions of modern life, as well as at 
the very beginning of civilization, the payment of 
interest, according to the economic definition of the 
word, is simply the payment of something for the use 
of material things produced by labor ; and there is no 
difference in character between the payment of inter- 
est on borrowed money and the payment of a stipu- 
lated sum for the use of a machine or building. In 
this connection, however, the distinction between 
interest and rent must ever be borne in mind, for 
when borrowed money is invested in land, whether 
improved or otherwise, the payment of interest on 



The Nature of Interest 39 

such portion of the indebtedness as was incurred for 
the purchase of the land, exclusive of any improve- 
ments, means the payment of rent, because it is not 
paid for the use of anything produced by human 
labor, but is paid for the use of land. 

The ax referred to was the product of three hun- 
dred days labor. This labor was not devoted to the 
production of things to be consumed, as comforts and 
luxuries of life, but to making a tool to assist in pro- 
ducing such things. While labor was employed in 
producing the ax, it received no wages. It might 
never receive wages for the work thus performed if 
unable to get pay for the use of the ax; in other 
words if unable to collect interest on the capital 
which the ax represents. Suppose the tool maker, 
after finishing the ax, was physically unable to use 
it, and that v/hile there were many people in the com- 
munity able and anxious to use the ax, none of them 
was able to buy it, since none of them had anything 
to give in exchange for it. It is clear that then labor 
would receive no wages for the toil expended on the 
ax unless permitted to receive interest for its use. 
Under such circumstances, when would labor begin 
to receive wages for work performed in making the 
ax? The answer is, just as soon as it began to 
receive something for the use of the ax, or in other 
words, as soon as it began to receive interest on the 
capital which the ax represented, and not before. 
Hence, in this instance at least, interest would be in 
effect wages paid for labor employed in making the 
ax ; nor would the fact that the tool maker was cap- 
able of using the ax himself alter the situation and 
make the payment of interest for its use anything 



40 The Problem of the Unemployed 

more or less in reality than the payment of wages 
for labor performed in producing it. 

And so it will be found in all cases, under modern 
as well as primitive conditions, interest on capital is 
in effect the deferred payment of wages to labor.* 
The capitalists may advance the laborer wage money 
as the work progresses, but on its completion, when 
the capitalist collects interest on the cost of the 
appliance, he is simply getting back the wage money 
which he advanced to the laborers who made it. And 
this is also the case even though the finished labor- 
saving appliances may be the product of a multitude 
of individual laborers who have been assisted by 
capital in producing it and who have been paid wages 
as the work progressed. If, in the case of the ax, 
what the ax owner got for its use was in effect wages, 
then what the owner of a steamship costing a million 
dollars gets for its use must in effect be wages also. 
True interest therefore in reality is wages paid for 
stored up labor. 

A vast amount of interest is paid on indebtedness 
incurred, however, not for the use of capital, but for 
things in the nature of wealth intended for imme- 
diate consumption, such as articles consumed in war 
and in the preparation for war, and in living 
expenses, and for capital that has been lost or 
destroyed ; and, most important of all, for indebted- 
ness incurred for land and the use of land. It is 
obvious that interest paid on indebtedness of this 
kind as well as indebtedness incurred in the purchase 
of land, cannot be regarded as wages paid to labor, 

*0f course this refers only to true interest, not to extortions 
sometimes due to law made monopoly of the medium of ex- 
change. 



The Nature of Interest 41 

since it is not paid for the use of appliances produced 
by labor which assist in the production of wealth. 

The conclusion, therefore, is that interest is what 
is paid for the use of wealth employed as capital in 
the production of more wealth ; that it is the reward 
for thrift and self-denial ; that its payment is inevit- 
able, owing to the inherent differences in the abilities 
and tastes of mankind; that it is but the deferred 
payment of wages to labor, and that its payment 
works no hardship upon labor, nor does it lessen the 
portion of the product which labor would otherwise 
receive, since but for its payment, there would be no 
incentive to provide labor with the use of labor- 
saving appliances. Interest, as thus explained, how- 
ever, must be limited strictly to the economic defini- 
tion of the word. 



CHAPTER IV. 

THE NATURE OF RENT. 

THAT there exists to some extent a popular preju- 
dice against the payment of interest, and appar- 
ently none at all against the payment of rent, is due 
to the fact that the distinction between land and 
wealth, and the difference between the payment of 
rent for land and the payment of interest for capital, 
is not fully understood. The difference is this: 
Economic rent is what labor pays for permission to 
produce wealth ; interest is what it pays for the use 
of appliances which assist in the production of 
wealth. Rent is paid for the license to use the 
machine ; interest is paid for the use of the machine 
itself. Hence it would seem to follow, since interest 
is but the deferred payment of wages, that if nothing 
were paid land for the privilege of use, all wealth, 
including that produced with the aid of the machin- 
ery, would go to labor as wages. In this connection, 
it is not meant that employees would get the entire 
product, but that the wages which they would receive 
together with the portion going as wages, to the 
employers, would include it all. In such event free 
competition would so regulate the division of the 
product that each would receive, approximately, the 
portion of the wealth which he produced. The diffi- 
culty is, however, that as soon as the factor of rent 
comes into play, competition, which fixes the price 
of everything connected with the industrial, world, 



The Nature of Rent 43 

and regulates interest and wages, is no longer free ; 
for although any product of labor can be indefinitely 
increased according to the demand for it, an 
increased demand for land can only increase the 
price which capital and labor must pay for the privi- 
lege of using it. 

The laws of supply and demand do not affect land 
and capital and labor in the same way; increased 
demand for anything produced by labor will increase 
the supply, and only temporarily affect the price, 
while an increased demand for land cannot increase 
the supply, but will permanently increase the price. 
Thus, an increased demand for axes will increase the 
number of axes produced, while competition among 
ax producers will soon reduce the price charged for 
axes, or for the use of axes, to the point where labor, 
applied to the production of axes, will be no more 
profitable than labor applied to the production of 
other articles; but since increased demand for land 
cannot increase the area of the earth, the effect of 
growth of population, which increases the demand, 
is simply to increase the portion of the wealth pro- 
duced which goes to the owners of land. 

In the primitive community referred to, rent made 
itself felt in the distribution of wealth as soon as one 
piece of land acquired a greater value than another. 
This must have happened at the very dawn of civili- 
zation, and with civilization came the private owner- 
ship of land. Wherever land has become valuable, a 
private owner for it has always been recognized by 
law and custom. The right of an individual to the 
untrammeled control of the tract of land to which he 
has acquired a title approved by the government hav- 
ing jurisdiction over it, has been admitted from time 



44 The Problem of the Unemployed 

immemorial. Investments in land have generally 
been made in good faith by all classes of people under 
an implied agreement that society would continue to 
protect private property in land in the future as in 
the past. For this reason it is sometimes insisted 
that good faith and good conscience demand that no 
legislation should be even contemplated which would 
abolish the privileges which the ownership of land 
confers — privileges in which all have the right to 
participate on payment of the price demanded. 
Nevertheless, no headway toward acquiring a knowl- 
edge of the fundamental truth on which the science 
of political economy is founded can be made, without 
a clear conception of the essential differences 
between property in land and property in the prod- 
ucts of industry. In stating the facts, however, on 
which these differences are founded, no attack on 
vested rights is to be inferred, for political economy 
has nothing to do with vested rights or vested wrongs 
but all and only to do with truth. However injurious 
in some respects the system by which the bounties of 
nature have so far been regulated and controlled may 
be to an overwhelming majority of mankind, never- 
theless it need not be assumed that such salutary 
changes as science may suggest cannot or will not 
be made without proper compensation to all whose 
wealth has been invested in land on the faith of the 
permanency of conditions now existing. 

The title to an article constituting wealth can be 
traced to the maker of it, to the person or persons 
whose toil created it, to someone who clearly had a 
right to use and dispose as he saw fit of the thing 
which his own labor had produced, either by sale, or 
gift, or otherwise. Not so, however, as to land. No 



The Natuy^e of Rent 45 

one's title to land can be traced back to the creator 
of it, since land is not the product of labor. Take 
the chain of title to any tract of land and go back 
with it, step by step, to its beginning. It will be 
found to have originated in an agreement on the part 
of those who constituted the government at that time, 
to the effect that John Smith and his heirs and 
assigns should forever dictate the terms on which 
men of that and all succeeding generations should 
have the privilege of producing wealth on or from 
the particular tract of land thus granted the said 
John Smith. The agreement gave John Smith the 
right either to produce wealth on this land himself, 
or to say how much of the wealth produced on it by 
others should be given him for allowing its use for 
that purpose. Private ownership of land means that 
by virtue of a compact between the then existing 
government and some individual, made it may be 
centuries ago, the present-day owner of a tract of 
land has the power to prevent any and all men from 
using it for wealth-producing purposes, or for any 
other purposes, except on terms satisfactory to such 
owner, subject only to the right of eminent domain 
on the part of the State. 

The nature of a title to land may be shown by the 
following illustration : The government of England, 
as embodied in William the Conqueror nine hundred 
years ago, might have given one of the courtiers of 
that day, as a reward for almost any kind of service, 
infamous or otherwise, a patent of nobility, and 
decreed that he and his eldest male lineal descendant, 
as the Earl of Enfield, should receive one-tenth of 
the income of every worker living on a definitely 
described tract of land known as Enfield, at that time 



46 The Problem of the Unemployed 

or at any time thereafter in all the ages to follow. 
This would not have been an unreasonable act of 
legislation for those times, and especially so since by 
its terms no one was compelled to live in the Parish 
of Enfield. As to whether or not the Parish of Enfield 
would have increased in population as rapidly as the 
surrounding parishes, would have depended on the 
terms on which the land owners of Enfield allowed 
wealth-producers, meaning workers of every class 
engaged in the actual production of wealth, to use 
land in Enfield for wealth-producing purposes. It 
would, of course, have been impossible for them to 
obtain as much for it as the owners of land in adjoin- 
ing parishes received for land of the same quality; 
but by reducing rents, or reducing the price of land 
(and this they would have been compelled to do in 
order to receive any income from the land at all) , the 
landlords of Enfield would have made that parish as 
desirable as any other place for wealth-producers to 
live in. Thus, since the aggregate amount of wealth 
paid by wealth-producers to land owners for the 
privilege of producing wealth amounts to probably 
more than ten per cent, of the total product, if the 
workers in the adjoining parishes were required to 
pay, say, the equivalent of fifteen per cent, or more 
of their incomes to landlords as rent, as would doubt- 
less have been the case, then the landlords of Enfield, 
by charging rent equivalent to, say, only ^ve per 
cent, of the wealth produced, would have placed the 
workers of Enfield on a parity with those in the 
adjoining parishes. The difference would have been 
that the fifteen per cent, of a worker's income paid 
for the privilege of living in Enfield would have been 
divided between the Earl of Enfield and the landlords 



The Nature of Rent 47 

of Enfield, while the same percentage paid for the 
privilege of living in an adjoining parish would have 
gone to the landlords alone ; hence it is evident that 
rent is the same as a tax on the incomes of wealth- 
producers, only it is paid to individuals instead of 
being paid to the government. 

Recurring to the illustration, it will be assumed 
that a city with a population of several hundred thou- 
sand grew up within the confines of Enfield, and that 
today the aggregate income of its inhabitants is 
twenty million dollars a year, of which the eldest 
male lineal descendant of the Earl of Enfield is 
receiving ten per cent, or two million dollars annual- 
ly. It would seem at first thought preposterous to 
assume that the law conveying to the original Earl 
and his successors one-tenth of the income of every 
person living in Enfield would not have been repealed 
long ago ; or that a free people in an enlightened age 
would feel that it was just and proper for them to 
hand over to the present Earl one-tenth of their 
incomes simply because of the fiat of William the 
Conqueror made nine hundred years ago. But sup- 
pose their fathers and forefathers for a score pr 
more of generations had submitted to the law and 
adapted themselves to it, and permitted the long 
succession of Earls of Enfield to collect this tribute 
and to rely in good faith on its being paid, and to live 
in a style of magnificence commensurate with this 
ever-increasing income, and thereby to become the 
embodiment of the highest examples of culture which 
wealth and lineage can bestow. Suppose, also, that, 
instead of Enfield being an exceptional case, the 
same percentage of the incomes of people living in 
other places, and in fact on all the other tracts of land 



48 The Problem of the Unemployed 

in the Kingdom, had also been allotted by William 
the Conqueror and his successors to various other 
persons and their descendants, together with per- 
mission to sell and assign the rights and privileges 
thus acquired, and to subdivide the territory to which 
the same applied. That thus a powerful minority of 
the people, embracing most of the wealth and social 
influence of the land, was interested, and had always 
been interested, in maintaining the laws on which 
these privileges were founded. In that case a very 
different situation would be presented. To repeal the 
law and cut off the privileges, in the purchase of 
which many people had invested a large portion of 
the savings of a lifetime; to suddenly reduce from 
luxury to but a competency, and in some instances to 
actual want, many of the best peop}e in every com- 
munity, would probably seem to most honest minds 
unjust, and nothing short of confiscation and rob- 
bery. In view especially of the fact that organized 
society had for hundreds of years permitted these 
privileges to be enjoyed and sold and disposed of 
without objection or protest, most people would be 
likely to insist on the adoption of some plan of com- 
pensation whereby the losses, for which society as a 
whole was responsible, should be apportioned among 
all. Be this as it may, the question of ethics sug- 
gested at this point is not one to be decided by the 
political economist. 

The fact is, that while neither William the Con- 
queror nor any of his successors ever granted in 
express terms to the Earl of Enfield, or to any other 
person, the right to collect one-tenth or more of the 
incomes of all the people then living, and thereafter 
to live, on any specified tract of land, the same thing 



The Nature of Rent 49 

was nevertheless accomplished in a much more effect- 
ual manner when the title to the tract of land was 
granted to the Earl of Enfield, "his heirs and assigns 
forever," as the legal phrase runs ; and this is what 
private property in land means. It means nothing 
more nor less than that the owner, by virtue of a 
legal enactment, probably made by men long since 
dead and buried, has the right to collect a constantly 
increasing portion of the income of all who are 
allowed to employ themselves in the production of 
wealth on the land which his title embraces. That 
such collection may be made in advance when one 
buys and pays for the site on which his own home or 
farm or business establishment is located, instead of 
paying rent annually or otherwise for its use, does 
not change the character of the payment — it is in 
each instance, as in all other cases, the payment of 
tribute money, not for wealth nor for the use of 
wealth, but for the privilege of producing wealth — 
tribute paid not to the government but to individuals. 



CHAPTER V. 

EFFECT OF IMPROVEMENTS IN LABOR-SAVING MACHIN- 
ERY AND PROGRESS GENERALLY ON RENT, 
INTEREST AND WAGES. 

AN attempt will now be made to apply the factors 
of production and distribution, as heretofore 
defined and explained, to the solution of the economic 
problems referred to in the first chapter. Under the 
plan adopted for presenting the subject, objections 
which may arise in the mind of the reader to propo- 
sitions when first announced and but briefly 
explained, will often be found anticipated and 
answered in subsequent pages. 

Wealth can only be produced in a civilized com- 
munity by the use of land and capital as well as by 
the expenditure of human labor. A portion of thq 
product of every wealth-producing enterprise, in 
effect, goes to a land owner as rent, another portion 
to a capitalist as interest, and another portion to a 
laborer as wages. As a general rule all incomes, 
except those of the character presently referred to, 
are made up of rent, interest or wages singly or in 
combination with each other. Causes which increase 
rent, or the value of land (which is the same thing), 
without increasing wages and interest in a corre- 
sponding degree, result in increasing dispropor- 
tionately the incomes of those whose wealth is prin- 
cipally derived from the rent of land or from increase 
in the value of land; causes which increase wages 



Effect of Improvements 51 

without increasing in a corresponding degree rent 
and interest, result in putting a greater portion of 
wealth into the hands of those whose incomes are 
derived principally from wages, and so also as to 
causes affecting interest. 

It is thus apparent that the natural law which 
controls the distribution of wealth must be found in 
the causes affecting, respectively, rent, interest and 
wages. The income of the mechanic owning the house 
in which he lives is made up of rent, interest and 
wages. Say that the building is worth a thousand 
dollars, the land on which it stands five hundred 
dollars, and that interest is 6 per cent, per annum. 
To arrive at his entire income there must be added 
to his wages of, say, six hundred dollars per year, 
6 per cent, on the value of the land and 6 per cent, 
on the value of the improvements. His total income, 
therefore, is $690 per year, of which $60 is rent, $80 
interest and $600 wages. As to a mechanic thus 
situated, a 10 per cent, increase in wages would be of 
greater benefit than a 10 per cent, increase in rents 
or in land values. Reflection will show that all 
incomes can thus be analyzed and portions of same 
traced to one or more of the factors of rent, interest 
and wages. 

^ While it is true that much wealth in this country 
is acquired in connection with incomes which cannot 
be attributed wholly to rent, interest, or wages, still 
the aggregate amount of wealth thus appropriated, 
for which no equivalent is given in the furnishing of 
land, or capital, or in the giving of service, is small 
in comparison with the entire annual product, of 
probably twenty billions or more. The conditions 
under which wealth is thus diverted, however, are 



52 The Problem of the Unemployed 

not natural but exceptional and temporary, and are 
often attributable to an improper exercise of govern- 
mental powers. Among such exceptions are incomes 
in the nature of pensions from the government, 
incomes acquired by fraud, or theft, or by extortions 
forced by combinations in restraint of trade, or by 
speculations, or by means of special privileges, such 
as patent rights, and privileges founded on a tariff, 
or on discriminations in railroad rates. Uniform 
natural laws can no more control the manner of the 
acquisition of wealth thus obtained, though no doubt 
much of it is honestly acquired, than in the case of 
wealth stolen by highwaymen. But the fact that a 
portion of the product of any wealth-producing 
enterprise may be diverted under such exceptions 
can in no way affect the causes constantly in opera- 
tion, which control the distribution of the remainder 
of it among the three factors of production, viz: 
Land, Capital and Labor. It is, therefore, neither 
necessary nor profitable, at this point, to consider at 
length exceptions of the character mentioned to the 
general rule that incomes are made up of rent, inter- 
est and wages. 

Since in any wealth-producing enterprise, a man 
may be interested as a land owner, a capitalist and 
a laborer at the same time, and his income from it 
may be attributable in part to rent, in part to inter- 
est, and in part to wages, confusion of thought will 
arise unless the distinction between the land owner, 
the capitalist and the laborer, as such, is sharply 
drawn in the reader's mind. To discover the causes 
which effect the distribution of wealth the sources of 
incomes must be separately considered. It must also 
be remembered that the word "labor" includes all 



Effect of Improvements 53 

effort, either mental or physical, put forth in the pro- 
duction of wealth ; also, that the so-called profits of 
capital, not attributable to rent or interest, and not 
coming within the exception just referred to, are but 
the wages of employers. Such wages under present 
conditions may be excessive, but nevertheless all 
wealth acquired from service of this character comes 
within the true economic definition of wages. The 
portion of an employer's effort, however, expended 
on some scheme by which he seeks to acquire wealth 
produced by others, as, for instance, by organizing 
and carrying on a combination in restraint of trade, 
is not labor, nor are the fruits of such effort wages. 
Such labor is not expended in the production of 
wealth. It does not increase the world's store of 
wealth. 

Bearing in mind the definitions of the terms used, 
and especially the distinction between land on the 
one hand and capital on the other hand, no difficulty 
will be experienced in determining the class to which 
goes the lion's share of the benefit, as between land 
owners, capitalists and laborers, resulting from 
improvements in labor-saving appliances and growth 
of population, and also from moral and material 
progress of every description. It is clear that if 
progress of the character referred to benefits land 
owners, it will be indicated by an increase in the 
value of land; if it benefits laborers, by an increase 
in wages, including the wages of employers, and if it 
benefits capitalists as such, it will be indicated by an 
increase in the rates of interest. We can thus deter- 
mine, approximately, the effect of labor-saving appli- 
ances and material progress generally on rent, inter- 
est and wages; or, in other words, on land owners, 



54 The Problem of the Unemployed 

capitalists and laborers, respectively. If the direct 
effect in the long run is only to increase rent or the 
value of land, then land owners alone can be directly 
benefited by it. If it appears that most if not all the 
benefit goes to land, then little or none can go to 
labor; therefore, if improvements do not naturally 
and directly increase v^ages, then in the fact just 
stated, viz., the fact that the principal part of all the 
increased wealth produced by improvements goes in 
the long run to land, and is absorbed in the increase 
in the value of land, will be found the reason for the 
failure of wages to increase in the same proportion 
as the wealth-producing power of the wage-earner 
increases. If contemporaneously with improvements 
in labor-saving appliances, with growth of popula- 
tion and progress generally, we find an increase of 
rents, or an increase in the value of land, with no cor- 
responding increase in wages, or in rates of interest, 
then it follows that the ultimate effect of such prog- 
ress is to increase the value of land only, hence 
neither rising wages nor rising rates of interest can 
naturally result from it, no matter to what extent the 
wealth-producing capacity of laborers may be in- 
creased thereby. 

The questions then to be answered in the first 
place are these: (1) Do improvements in labor- 
saving machinery, and material progress generally^ 
naturally and inevitably increase interest? (2) Do 
they naturally and inevitably increase wages? (3) 
Do they naturally and inevitably increase rent or the 
value of land? The questions thus propounded will 
be answered in the order stated. 

The popular impression, especially among those 
with socialistic tendencies, is that capital, as such, is 



Effect of Impr^ovements 55 

the chief recipient of the benefits arising from indus- 
trial progress. This impression exists because the 
points of difference between land and capital, and 
also between the ownership of capital and the use 
of capital by its owner, or by the borrower of it, are 
not clearly understood and appreciated. The obvious 
and indisputable fact, however, regardless of any 
theory about it, is, that increase in population and 
improvements in the arts and sciences, while accom- 
panied by rising land values and increasing rents on 
one hand, are always followed by a fall in the rates 
of interest on the other hand. The first question 
must therefore be answered in the negative. 

In sparsely settled and disorderly communities 
the world over, interest is high and rent is low; 
in other words, in such communities, comparatively 
large sums are paid for the use of capital or wealth, 
while comparatively small sums are paid for the 
use of land or for the purchase of land. With im- 
provements in government and growth of popula- 
tion, this is always reversed, and the rate of interest 
falls, while the price of land rises. Thus, on Manhat- 
tan Island, two hundred and fifty years ago, interest 
was 15% per annum, and a lot suitable for business 
purposes could have been bought for $500, or the 
use of it obtained for a rental of $75 a year. To- 
day, in New York, interest has fallen to 4% per an- 
num, but the same lot is worth a million dollars, and 
the use of it can not be had short of thirty thousand 
dollars a year. In London and in New York, where 
population is most dense, and the arts and sciences 
have reached the highest degree of perfection, land 
is high, but the rate of interest is low; while in 



56 The Problem of the Unemployed 

frontier towns and cities, interest is high and land 
is low. 

The correctness of the answer given is also con- 
clusively shown by the fact that while inventions 
have multiplied enormously, even within the memory 
of the present generation, nevertheless rates of inter- 
est are lower than ever before. And in the most 
highly civilized countries, where labor-saving im- 
provements are most extensively used, interest is 
lower than in partially civilized ones where they are 
little used. 

That growth of population and progress do not in- 
crease the value of building improvements, or inter- 
est on the capital represented by them, is obvious, 
yet confusion of thought on this point is sometimes 
manifested by confounding ground rent with the 
interest on the capital which the building represents. 
The total rent of a building, including the ground, 
may increase from ten thousand dollars to twenty 
thousand dollars a year, but it is not the building 
that has become valuable, nor is the increased in- 
come obtained from the use of the entire property 
attributable to increase in rates of interest. In fact, 
the building may have depreciated in value. It is 
the land, and the land alone, on which the building 
stands, which is more valuable. The increase in 
rent which the tenant pays is not for the use of the 
building, or any part of it, but for the use of land 
which has become more valuable. That such im- 
provements do not increase in value from causes 
which increase the value of land, is apparent also 
from the fact that insurance companies never know- 
ingly insure a building for more than it will cost to 
replace it. 



Effect of Improvements 57 

Now as to the second question : Do improvements 
increase wages? It will be noted that the subject of 
inquiry is confined to the "natural and inevitable" 
effects upon wages of labor-saving improvements 
and progress generally, or, in other words, to the 
direct as distinguished from the indirect effects. 
Thus, contemporaneously with an enormous increase 
in the wealth-producing power of the employee, there 
may be a considerable increase in the purchasing 
power of his wages. Some classes especially, if not 
all classes of laborers, may be better off now than 
they were, for instance, fifty years ago, although this 
is denied by many who have investigated the mat- 
ter ; yet, nevertheless, if they are better off this may 
not be attributable to the direct effect of labor-saving 
inventions. Improvements in labor-saving machin- 
ery might, for instance, enormously increase the 
amount of wealth produced by slaves, but in such 
event, free competition and the law of supply and 
demand would not operate with irresistible force to 
compel masters to spend more in the better main- 
tenance of slaves, or, in other words, to pay slaves 
higher wages. The increased ability of masters, 
however, to do so, coupled with kindly feelings and a 
disposition to make the slave less discontented with 
his lot, would doubtless bring about some slight im- 
provement in his condition, not as the direct, but as 
the indirect effect of the increased amount of wealth 
produced by slaves. So, in the same way, the im- 
provement, if any, in the condition of employees, 
may not be attributable to the natural and inevitable 
result of inventions under the operation of the law 
of supply and demand and free competition, but to 
combinations of workingmen, and to public senti- 



58 The Problem of the Unemployed 

ment which demands that laborers shall receive some 
benefit from inventions. It may also be attributable 
in part to a vague fear of revolution if wages were 
crowded to the lowest possible point ; also in part to 
sympathy of many employers toward their em- 
ployees, as well as to other like causes. 

It will be found that labor-saving processes, as 
well as increase of population, under the laws of 
supply and demand and free competition, have the 
direct effect of enhancing the value of land and the 
price paid for the use of it ; the question is, do these 
forces, in the same way, also directly increase the 
price paid for labor? This question cannot be an- 
swered in the affirmative by simply showing, if it 
can be shown, that wages are higher now than for- 
merly. For wages might rise to some extent from 
causes already referred to, even though the unre- 
stricted operation of the laws of supply and demand 
would cause them to fall with increase of population. 

The question as to whether wages of employees are 
in fact rising or falling — as to whether they are rela- 
tively higher today than before the introduction of 
modern labor-saving appliances — is one about which 
much difference of opinion exists. The difficulty does 
not lie so much in ascertaining the amount in dollars, 
or shillings and pence, paid employees in former 
days, as in arriving at the purchasing power of 
money at that time. In this connection, it is instruct- 
ive to take at random the views of those who have a 
personal experience of forty or fifty years to draw 
upon. It will be found that the man who has made 
a pecuniary success of life is more apt to think that 
wages are higher and are growing higher, than the 
less successful one who is still working in the ranks. 



Effect of Improvements 59 

Those of the laboring class usually insist that wages 
^re lower and that the struggle for existence is hard- 
er. This perhaps will be found to be the impression 
of a majority of all classes who are approached upon 
the subject. 

Carroll D. Wright, in "Practical Sociology," esti- 
mates that hours of labor have been reduced 10% 
since 1860, and that the purchasing power of wages 
in 1902, measured by wholesale prices, was 80% 
higher than in 1860. On the other hand, Mr. Fair- 
banks, in an interview while a candidate for the Vice- 
Presidency, in referring to the way in which he man- 
aged to get through college, is reported as saying: 
"I received good wages by working on Saturdays at 
$1.50 a day, which was equal to about $3.00 now." 

The wages of the agricultural and unskilled labor- 
ers of England are now less than one-half of what 
they were during the fifteenth century, nor are they 
any higher today than at the end of the thirteenth 
century. This is especially the case as regards the 
ability of the workingman to provide himself with 
the essentials of life, such as shelter, food, fuel and 
clothing. At the end of the fifteenth century, wages 
of employees generally in England were from three 
to four times higher than in the early part of the 
nineteenth century. And not only so, but from the 
middle of the fourteenth to the middle of the six- 
teenth century, eight hours constituted a full day's 
work. 

Professor Thorold Rogers puts the result of twenty 
years of patient investigation of comparative wages 
in his "History of Agriculture and Prices." The 
sources of his information were old exchequer bills, 
the college records, the manor rolls, the farm ac- 



60 The Problem of the Unemployed 

counts, preserved often by accident in libraries and 
in public and private archives. He collected thou- 
sands and thousands of records of prices actually- 
paid for different commodities, and he gives all the 
facts and figures showing the details by which his 
averages are arrived at. The accuracy of his find- 
ings of fact on all important matters has never been 
impugned, and he seems to be sustained by all au- 
thorities upon the subject.* He began his studies as 
an orthodox economist of the laissez-faire school, 
opposed to trade unions, and under the impression, 
evidently, that all social ills would cure themselves. 
He saw no necessity for the discovery of the cause 
of undesirable economic conditions, such as the enor- 
mous increase of private fortunes, and the fact that 
men willing to work are often unable to find work, 
and that multitudes of workers in a country like 
England are in a condition of chronic semi-starva- 
tion. 

The following extracts are taken from his "Six 
Centuries of Work and Wages" : 

"I have stated more than once that the fif- 
teenth century and the first quarter of the six- 
teenth were the golden age of the English la- 
borer, if we are to interpret the wages which he 
earned by the cost of the necessaries of life." — 
p. 326. 

"Relatively speaking, the working man of 
today is not so well off as he was in the fifteenth 
century." — p. 355. 

In summing up at the close of "Work and Wages," 
he uses the following language: 

"I have shown that from the earliest recorded 

*Leone Levi, F. S. S. — History of British Commerce. 
G. R. Porter — Progress of the Nation. 



Effect of Improvements 61 

annals, through nearly three centuries, the con- 
dition of the English laborer was that of plenty 
and hope ; that from perfectly intelligible causes 
it sunk within a century to so low a level as to 
make the workmen practically helpless, and that 
the lowest point was reached just about the out- 
break of the great war between King and Par- 
liament. From this time it gradually improved, 
till in the first half of the eighteenth century, 
though still far below the level of the fifteenth 
it achieved comparatively plenty. Then it be- 
gan to sink again, and the workmen experienced 
the direst misery during the great Continental 
war. Latterly, almost within our own memory 
and knowledge, it has experienced a slow and 
partial improvement." 

It is evident that the percentage of increase or de- 
crease in wages in America in the past fifty years, 
taking into account the purchasing power of the 
money earned, can be but trifling at most, or there 
would be no such differences of opinion about it ; and 
it is apparent, especially in view of the result of the 
investigation made by Prof. Rogers and others, that 
so far, labor-saving inventions have failed to raise 
the wages of employees. In this connection, the fact 
is significant that the trades in which there appears 
to be the greatest increase in wages in England since 
the beginning of the last century, are those most 
strongly dominated by labor organizations. This 
tends to show that the rise in wages in England dur- 
ing the past seventy-five years is not the result of 
causes naturally flowing from the operation of the 
law of supply and demand on account of increased 
production brought about by modern labor-saving 
machines, but from combinations of working men. 
As shown by the authorities referred to, the darkest 



62 The Problem of the Unemployed 

days of the English laborer were from 1780 to 1830 ; 
since then there has been a slow but steady improve- 
ment in his condition, but during this period of im- 
provement the great labor unions of England, now 
the most powerful in the world, steadily increased 
in strength and efficiency. Up to 1824, such organ- 
izations were illegal and were often sternly sup- 
pressed by law. 

While there is somo difference of opinion as to 
whether wages of employees on the whole are slightly 
higher or slightly lower, now than say fifty years 
ago, no one doubts the enormous increase of wealth 
produced by labor-saving inventions. Neither is 
there room for doubt that the average increase in 
the power of the employed laborer to produce wealth 
greatly exceeds the increase, if any, in the wages 
received by him; the only question being as to the 
ratio of such increase. 

The laborer of today often produces more wealth 
in an hour than his grandfather did in a week, and 
instances in which the production is tenfold greater 
are almost innumerable. Six or eight men with a 
modern cotton gin will separate as much lint from 
the seed and bale it, as several thousand could in the 
same length of time before Whitney's invention; 
while improvements in spinning and weaving enable 
a single laborer now to do what was once the tasl- 
of hundreds. Benjamin Franklin printed one hun 
dred copies of his paper in an hour ; today, one ma- 
chine in an hour automatically prints, cuts, counts, 
pastes, and labels 100,000 copies, each of which is a 
hundred times greater than the sheet which Frank- 
lin published. With a planing machine, one man 
does the work of thirty planing by hand ; and as to 



Effect of Improvements 63 

numberless small articles like tacks, nails and screws, 
the product of one man's work exceeds that formerly 
produced by hundreds. A dozen men can make more 
flour, including the raising of the wheat, than a thou- 
sand can consume. 

It is impossible, however, to ascertain with cer- 
tainty the ratio of the increase in the wealth-produc- 
ing effectiveness of labor. In a recent magazine 
article, it was gravely asserted that on an average 
the laborer of today produces fifty times as much 
wealth as the laborer of a hundred years ago, and it 
is not uncommon for the ratio to be estimated at ten 
to one ; but such guesses are widely extravagant. The 
average farmer still milks his cows, makes butter, 
looks after his stock, cuts wood, hauls his produce to 
market, feeds chickens, gathers fruit and eggs, raises 
vegetables, builds fences, and does the great bulk of 
his work without the aid of other appliances than 
those in use when Benjamin Franklin was a boy. 
And this is largely true as to storekeepers, clerks, 
accountants, carpenters, masons and the building 
trades generally; and so also as to cooks, cabmen, 
waiters and housekeepers, and workers in scores of 
other lines of employment. The fact is that half, 
if not three-fourths, of the work of the world is still 
done with the tools in use hundreds of years ago. 

The census returns show that the wealth of the 
country per capita, as already stated, has increased 
from $308 in 1850 to about $1,800 in 1914, a six- 
fold increase per capita, which can only be attrib- 
uted to the effect of labor-saving improvements and 
processes.* If it be assumed that the aggregate sav- 

*Although in the census, land is improperly classed as 



64 The Problem of the Unemployed 

ings of a community or nation increase in the same 
proportion as its aggregate increase of incomes, then 
the conclusion can be drawn from the figures men- 
tioned above that improvements in labor-saving pro- 
cesses have, since 1850, increased the wealth-produc- 
ing powers of labor six-fold, and this is doubtless ap- 
proximately the fact. No one will contend, however, 
that there has been a six-fold increase in wages dur- 
ing the period referred to above. Hence from the 
facts bearing upon the subject, the theory that under 
existing conditions and under the operation of the 
law of supply and demand, labor-saving inventions 
do not directly increase wages, is amply sustained by 
experience. The second question is therefore an- 
swered in the negative. 

That labor-saving inventions in themselves, as well 
as increase of population, directly increase the value 
of land and raise rent, is equally apparent. It will 
be found that the third question must be answered in 
the affirmative. To illustrate : 

Electricity, the trolley line and the automobile 
have superseded the horse in the operation of street 
cars. Land miles away has been brought in point of 
time to the very centers of cities and thus greatly 
increased in value, and rents on such land have ad- 
vanced accordingly. By the aid of barbed wire the 
cheap lands of the Southwest in the timberless dis- 
tricts have been fenced for a fraction of what it 
would otherwise have cost, and for this reason have 
been rendered more attractive to the homeseeker, 
and the price of the land has on this account in- 
creased. Improvements in pumping water in great 

wealth, the ratio of the increase of wealth per capita is doubt- 
less correctly shown. 



Effect of Improvements 65 

quantities, and also in harvesting processes, were 
applied some years ago to the cultivation of rice on 
the sour, flat prairies of Southern Texas, and these 
lands, within two or three years, doubled and quad- 
rupled in value. Improved highways, telephone, 
light, water and street car service, all combine to 
make the land in connection with which such ad- 
vantages can be enjoyed, more desirable, and the 
fact of its being more desirable adds to its selling 
price, and increases the rent which must be paid 
for the privilege of using it. 

So, also, good neighbors, good schools and good 
government make land more attractive and increase 
rents accordingly. In one of the Southern cities, the 
sale of intoxicating liquors was prohibited for a 
number of years. In commenting upon the results 
of the experiment, one of the local papers stated that 
much of the money which the working men of the 
town formerly threw away in saloons was being 
invested by them in building lots, and the great im- 
provenient in the local real estate market was attrib- 
utable to prohibition. This would naturally be the 
case. The virtues of temperance and frugality can- 
not increase rates of interest or raise wages, but they 
can and do increase rent and the values of land for 
two reasons ; first, because a community inhabited by 
people of sufficient intelligence, self-respect and firm- 
ness of character to practice such virtues is a desir- 
able one in which to live and raise one's family, and, 
other things being equal, population will be attracted 
to it, and land values and rents will, as a conse- 
quence, be increased. Second, because the more 
wealth the people of a community save, over living 
expenses, the more they have to invest in land, as 



66 The Problem of the Unemployed 

well as in other things, and this will create a greater 
demand for land, and this demand will increase the 
price. 

That not only increase of population but every 
thing which adds to the efficiency of labor and im- 
proves the conditions under which men live, simply 
adds in the long run and in the main, to the value of 
land and increases the income of those whose inter- 
ests as land owners exceed their interest as laborers 
and capitalists, will be made more clearly apparent 
in subsequent pages. 

The conclusion stated above, that land owners, and 
only a portion of them, appear on the whole and in 
the long run to be the beneficiaries of progress, may 
not be assented to except upon careful reflection, nor 
perhaps until the end of the discussion is reached. 
It may be claimed, for instance, that there are no 
indications of farmers, who are the most numerous 
of the land-owning class, receiving any great amount 
of the wealth resulting from improvements in labor- 
saving machinery. The portion of the wealth pro- 
duced which land receives, however, depends not 
upon the amount or area of land, but upon its value, 
and most of the land in cultivation is of little value 
compared with that of urban lands and lands held 
for other than agricultural purposes. What is really 
claimed, however, is not that all wealth produced is 
divided among the factors entering into its produc- 
tion, but that as to the portion of it thus divided, the 
part going to land is increased by labor-saving ma- 
chinery and progress of every character, while the 
portion going to capital and labor is not thus in- 
creased from the same cause, and that hence the 
land owner, and not the capitalist or the laborer, gets 



Effect of Improvements 67 

the benefit of progress. Probably four-fifths of those 
engaged in agricultural pursuits have greater in- 
terests as capitalists and laborers than as land own- 
ers, and accordingly it is not to be expected that 
farmers as a class would be greatly benefited by 
causes which simply increase the value of land with- 
out increasing interest or wages. 

Again, the fact that immense private fortunes have 
been accumulated during the present generation oth- 
erwise than from an increase in land values, may 
also be given as a reason for doubting the conclusion 
that land owners in the end get almost the entire 
benefit of material progress. These newly, enor- 
mously rich, however, who have appeared simultan- 
eously with the recent wonderful improvements in 
labor-saving appliances, and whose incomes are only 
in small part, comparatively, made up of rent or in- 
terest or wages, belong to an exceptional class, enjoy- 
ing incomes for which no equivalent in labor or the 
use of land or capital is given. To this class must be 
assigned those whose incomes constitute exceptions 
to the natural law which controls the distribution of 
wealth, and in the main arise from disobedience of it. 

The ratio of the division of wealth between the 
factors of production, land, capital and labor, is not 
fixed, but is determined by the law of supply and de- 
mand. While the number of laborers and the amount 
of capital is constantly increasing as well as the pro- 
ductive capacity of the laborer, land remains a fixed 
quantity, and rent, or the value of land, increases be- 
cause the supply of land cannot increase, hence the 
ratio of the division of the product is constantly 
changing in favor of land. 



68 The Problem of the Unemployed 

The further discussion of the subject, therefore, 
will be carried on upon the assumption that improve- 
ments in labor-saving processes and human progress 
generally, in the long run, increase the value of land, 
but do not naturally increase the wages or rates of 
interest. The truth of this assumption will be con- 
clusively established, not only by reference to addi- 
tional facts, but by showing that, in the very nature 
of things, under existing conditions, neither wages 
nor rates of interest can naturally advance, even 
though improvements were to be carried so far as 
finally to enable the laborer to produce in an hour 
what now requires the work of years. The assertion 
just made has reference to the natural effect on 
wages and interest of human progress generally. In 
the contingency mentioned, other factors of the char- 
acter referred to by Mr. Ghent in his "Benevolent 
Feudalism," would doubtless bring about a compara- 
tively insignificant increase in wages. 



CHAPTER VL 
THE ALL IMPORTANT QUESTION. 

WHY DO NOT IMPROVEMENTS IN LABOR-SAVING PRO- 
CESSES NATURALLY INCREASE WAGES? 

IT having been shown that increase of population 
and improvements in morals, general intelligence 
and government, as well as in labor-saving processes, 
raise the value of land and increase the price which 
must be paid for the privilege of using it without in- 
creasing interest, or the wages of the great mass of 
laborers, in anything like the same proportion, if at 
all, the reason for this fact is next to be considered. 

In the first place, wages do not naturally rise with 
the increasing wealth-producing power of the la- 
borer, simply because there are not enough jobs to 
go around. 

The assertion is often made that any laborer who 
really wants work can always get it, the inference 
being that it is only the indolent and inefficient who 
ever fail of having employment. It is doubtless true 
that the working man who, by greater faithfulness 
and efficiency, in effect gives more labor for the 
same wages, and in this way unconsciously under- 
bids his fellows, is always reasonably sure of employ- 
ment, even in times of depression ; but it by no means 
follows that, if all working men were equally as 
faithful and efficient, all would be equally as sure 
of employment as the one who is now exceptionally 
so. Such improvements in faithfulness and efficiency 



70 The Problem of the Unemployed 

on the part of all laborers would simply increase the 
amount of wealth produced by them; but this is 
what labor-saving machinery accomplishes. Why, 
then, should increased efficiency resulting from a 
general improvement in the character of laborers 
do more? Both would result in an increase of the 
output; but we have seen that an increase in the 
amount of wealth which laborers produce does not 
necessarily result in an increase of wages, otherwise 
labor-saving machinery would raise wages. 

In any event, however, whether much or little of 
the idleness on the part of laborers is voluntary or 
not, large numbers of them are always eager for the 
places of those who have steady employment. This 
is shown by the fact that whenever a strike occurs, 
some men are always ready to take the places of 
strikers, and many more are only deterred from do- 
ing so by moral or physical force exerted by labor 
organizations. It is also the universal testimony of 
the managers of business establishments and em- 
ployment agencies, and of those who occasionally 
advertise for labor, that in all lines of employment, 
from the highest to the lowest, men are always anx- 
ious for jobs, either because they are wholly out of 
employment or but partially employed, or because 
they feel that they are underpaid in the positions 
held by them. The numerous newspaper accounts of 
men and women who commit suicide for want of 
employment indicate a real scarcity of jobs. Again, 
how is it otherwise possible to account for the appar- 
ent heartlessness of thousands of parents in this 
country who consign their own children, sometimes 
under ten years of age, to the monotonous and health- 
destroying slavery of mills, sweat-shops, chemical 



The All Important Question 71 

works, coal breakers and match factories? And 
again, what other explanation can be given of the 
fact that railroad companies, even though fixing the 
age limit of new employees at forty-five years, and 
sometimes under, and subjecting them to severe phys- 
ical examinations, never fail to have on hand long 
lists of applications for employment from men both 
competent and eligible? 

Complaint of a scarcity of labor is sometimes 
heard, however, in this country, and in many quar- 
ters the Chinese exclusion act is deprecated. But 
investigation will invariably show that there is never 
any scarcity of applicants for positions which are 
permanent, when the wages are sufficient to enable 
the employee to live according to American stand- 
ards. The American laborer naturally objects to be- 
ing forced to submit to the competition of those of his 
own calling from the South of Europe. To accept 
employment for wages which would imply the lower- 
ing of the standard of living of his class would not 
increase the demand for labor. It would simply tend 
to lower the wages of all laborers. The self-respecting 
workingman, therefore, often rightfully refuses to 
accept employment at reduced wages until compelled 
to do so by absolute want; but this does not imply 
any scarcity of labor or an abundance of opportuni- 
ties for employment. 

The tramp is often thoughtlessly referred to in sup- 
port of the claim that idleness on the part of laborers 
who are out of employment is not involuntary. But 
many who are classed as tramps will work when they 
can get work, otherwise why is it that tramps are so 
much more plentiful in periods of industrial depres- 
sion than in prosperous times ? The confirmed tramp 



72 The Problem of the Unemployed 

is usually a laborer who, by being compelled to travel 
and beg for work, has lost his self-respect. Prior to 
1850, there was little complaint of a scarcity of jobs 
in the United States, and up to that time there were 
practically no tramps or beggars in this country. 

Occasionally, as in harvest times, there may be a 
temporary scarcity of help in some localities, or 
laborers may be unwilling to work for the wages 
offered when the employment is but temporary. A 
slight increase in wages above the average, espe- 
cially when permanency of employment is assured, 
will always fill to overflowing the labor market of 
the locality where such wages are paid, and render 
any further advance impossible. The law of supply 
and demand regulates prices paid for labor, just as 
it regulates prices paid for commodities, and as com- 
binations of manufacturers may sustain or raise 
the prices of commodities, so combinations of work- 
ingmen may sustain or raise the prices of certain 
kinds of labor. But in neither case is there any es- 
cape from the pressure of the lav/ of supply and de- 
mand, and, in most cases, it overcomes all resistance 
and forces the price of labor as well as the price of 
commodities to the minimum point. 

The claim that at all times large numbers of work- 
ers in the United States are unwillingly idle is not a 
mere matter of opinion, since it is established from 
data collected by the census enumerators and shown 
in the census reports. And here again reference is 
made to the optimistic Carroll D. Wright, who states 
that on an average about 5% of the workers of the 
country are at all times unable to obtain employ- 
ment.* 

*"Practical Sociology," p. 243. 



The All Important Qicestion 73 

A moment's reflection will satisfy one that so long 
as 5%, or even 1%, of the workers in any line of 
employment are unemployed, wages in such line can 
never naturally advance, though they m^ay be slightly 
lifted artificially by the fear of strikes and from 
other causes. Why should A pay B higher wages, 
when C stands ready to do the same work for the 
same or even lower wages ? The one man in twenty 
out of employment and seeking employment is a con- 
stant menace to all the other nineteen who are 
employed. His offer to work for lower wages may 
result in lowering the wages of the other nineteen, 
even though he fail of getting employment himself. 

A small minority of laborers, unable to get work 
or finding difficulty in obtaining it, must necessarily 
prevent wages from rising, even though the over- 
whelming majority are regularly employed. If there 
are jobs for only ninety-five laborers out of a hun- 
dred, the five unemployed are always ready to take 
the places of the employed, and the effect constantly 
of an unemployed or but partially employed five per 
cent., or even one per cent., anxious to get the places 
of some of the employed ninety-nine per cent., will 
inevitably prevent wages from naturally advancing, 
no matter v/hat may be the increased amount of 
wealth produced. Nor would it make any difference 
whether the increase in production resulted from 
greater faithfulness and energy of wage-earners, or 
from improvements in labor-saving appliances 
operated by them. On the other hand, if there were 
always jobs for a hundred and five or even a hundred 
and one laborers, when there were only one hundred 
to be had, so that at all times men wanting work 



74 The Problem of the Unemployed 

could get it without difficulty, wages would always 
tend to rise. 

It is clear that under present conditions wages 
cannot rise as the natural result of progress in labor- 
saving appliances, even though the wealth which 
the laborer produces should be increased thereby 
ten-fold, or, for that matter, a hundred or even a 
thousand-fold. It is equally true that there can be 
no increase in wages from natural causes until every 
man wanting v/ork can readily get work, and that 
too without having to regard it as a favor to himself 
to be furnished with work. The solution of the prob- 
lem of the unemployed, therefore, involves the study 
of conditions affecting the demand for labor, and 
this includes a consideration of the obstacles to the 
employment of capital and labor. It must logically 
follow, therefore, if there are artificial obstacles to 
such employment, then in the fact of the existence 
of such obstacles will be found a reason, if not the 
reason, for the lack of the full employment of labor. 

The scarcity of jobs referred to is not attributable 
to improvements in labor-saving machinery. 

To lessen the number of jobs means to lessen the 
demand for labor and lower wages ; to increase the 
number of jobs means to increase the demand for 
labor and raise wages. Jobs, therefore, are most 
plentiful in proportion to population in countries in 
which wages are highest. It is a significant fact, 
also, that in such countries, fortunes are most rapid- 
ly accumulated, which tends to show that employers 
and business men as a class have nothing to gain 
from a lower scale of wages. In the United States, 
Canada, and the Australian Colonies, where land is 
still comparatively cheap, wages are higher than any- 



The All Important Question 75 

where else in the world, yet in no other countries are 
labor-saving machines more extensively used. In 
fact, the world over, other things being equal, wages 
are highest in the countries using the greatest 
amount of labor-saving machinery, and lowest in 
countries using the least amount. Besides, the com- 
plaint of the unemployed in all the thickly settled 
countries of Europe was as loud and bitter before 
the introduction of modern labor-saving machinery 
as at present. 

There is no reason in the nature of things, why la- 
bor-saving appliances should reduce wages. This is 
apparent from the following illustration: I have 
four dollars with which to buy a pair of shoes. By 
means of a labor-saving invention, one man becomes 
able to do the work of two in the making of shoes. 
The price of a pair of shoes, therefore, is reduced 
to two dollars, and many shoe-makers perhaps are 
forced to abandon the making of shoes. I pay 
two dollars for the shoes, but now I have two dol- 
lars left to spend for something else, which but for 
this invention would have been spent for the shoes, 
and in the buying of two dollars worth more of 
something else, I will have increased the demand 
for other kinds of labor to the same extent I would 
have increased the demand for the labor of shoe- 
makers, had the two dollars been spent for shoes. 
While the adoption of labor-saving processes pro- 
duces displacements of labor and hardships to in- 
dividual laborers, no diminution in the ultimate 
demand for labor can result therefrom. It is thus 
evident, from theory as well as experience, that 
the scarcity of jobs cannot be attributed to labor- 
saving processes. 



76 The Problem of the Unemployed 

Nor is the scarcity of jobs caused by mere increase 
of population or by any real scarcity of land. 

A moment's reflection must satisfy one that there 
is no real scarcity of land. More than half the dry 
land of the world, suitable for agricultural purposes, 
is as yet untouched by the hand of man, and im- 
mense areas of virgin soil of unsurpassed fertility 
are still to be found in nearly every country, and 
especially in South America, Africa, Siberia and 
Australia. The State of Texas alotie could easily 
produce food and clothing for all the inhabitants of 
France, for it has a larger area and its soil is equally 
productive. It is estimated that less than tv/o acres 
of land of average fertility, when cultivated with 
reasonable skill and diligence, is amply sufficient, 
with the least expenditure of labor, to produce in 
abundance the raw material necessary for the sus- 
tenance of a human being. Under an intensive and 
scientific system of agriculture, such as density of 
population would encourage, doubtless a single acre, 
or even half an acre, would be amply sufficient. In 
Japan the land in cultivation amounts to less than 
one acre to each inhabitant, and its entire cultivated 
area with its forty-five million people, is less than the 
area of Illinois. More than half the present popula- 
tion of the world could easily be sustained within the 
limits of the United States alone. More than one- 
fourth of the lands of Europe are unused. The uncul- 
tivated or but partially cultivated lands of thickly set- 
tled Great Britain, which are now held in compara- 
tive idleness, including the millions of acres devoted 
to private parks and used as game preserves, as well 
as the hundreds of thousands of acres of unused land 
in cities and towns and their suburbs, are capable of 



The All Important Question 77 

producing with ease all the important food supplies 
imported into that kingdom. And the use of these 
lands for agricultural purposes is prevented only by 
the whim of owners and by the amount of the pur- 
chase price demanded. Modern means of transport- 
ation and facilities for exchanging the products of 
labor, make the unused lands of countries thousands 
of miles distant in effect a part of the unused lands 
of England, and the employment of additional labor- 
ers on such lands would enable the English working 
man to exchange his products for food produced by 
them. 

In Greater New York there are tens of thousands 
of acres of land wholly unused, including more than 
one-third the area of the city, there being within 
the corporate limits of the city, on an average, twen- 
ty-seven people to the acre, although in the congested 
tenement districts the population may exceed a thou- 
sand to the acre. In the United States, four acres 
out of five are in fact unused or but partially used. 
When land is referred to as being but partially used, 
it is meant that it is not so used as to produce the 
greatest amount of wealth with the least expenditure 
of labor. 

And so in all countries are to be found, on every 
hand, idle lands and unused coal beds and mineral 
deposits, from which profitable returns to capital 
and labor could be obtained but for the price required 
for the privilege of using them. Such lands are not 
held out of use because of any lack of fertility or on 
account of distance from markets; they are often 
to be found within and at the very gates of cities and 
towns, and in the midst of highly developed farming 
communities. So long as lands of this character re- 



78" The Problem of the Unemployed 

main unused, or but partially used, neither the theory 
of Malthus nor the law of diminishing returns can 
have any real or necessary application. 

Suppose three acres on an average to be required 
for the comfortable maintenance of each human be- 
ing under present methods of cultivation. In the 
United States, after deducting as waste land one- 
fourth of the area of the country, there would re- 
main twenty-one acres per capita, or eighteen acres 
in excess of the necessary number. If the population 
were doubled, there would be an excess of fifteen 
acres, and if trebled, an excess of twelve acres, over 
and above the amount required for the support of 
the entire population, and so on. In point of fact, 
population in this country cannot begin to crowd the 
means of subsistence for centuries yet to come, even 
should it continue to increase in the future as rapid- 
ly as in the past. So far as actual experience is con- 
cerned, population has never become dense enough 
in any country to result in the full employment, or 
anything like the full employment, of the lands of 
such country. And idle men and women have died 
of starvation in thickly settled communities, in the 
midst of vast areas of unused or but partially used 
lands. 

When the civilized world was appealed to a few 
years ago to assist millions who were starving in 
India on account of a failure of crops in certain sec- 
tions of that country, contributions in money were 
wanted and not shiploads of wheat, as some mis- 
taken philanthropists supposed. There was an 
abundance of food in India, and the wholesale price 
of it scarcely advanced at all. People starved, not 
because there was no food, but because they could 



The All Important Question 79 

not get employment. The same was the case in Ire- 
land when the potato crop failed in 1845. Food, 
with the exception of potatoes, was about as cheap 
as ever, and there was plenty of it on the island 
or within easy reach. All the starving populace 
wanted was employment. During that period of dis- 
tress, in which tens of thousands were permitted to 
starve to death, the vessels which crossed to Eng- 
land were loaded down as usual with sheep, cattle, 
butter and eggs and the miscellaneous products of 
the farms, sold for shipment abroad to raise money 
due as rent to absent landlords. 

It is not necessary to take up the time of the reader 
in a discussion of the Malthusian theory of increase 
in population. It is now discredited in all quarters. 
The fallacy, if not the absurdity of it, seems to have 
been admitted, tacitly or otherwise, by all economic 
writers since Henry George's masterly treatment of 
the subject in Progress and Poverty. 

Every man comes into the world with two hands 
with which to work and supply his wants. If cast 
away upon an uninhabited but fertile island, he could 
make a generous living with no other capital than an 
ax, a hoe and a spade. In every civilized community 
the unemployed man can always find within a few 
minutes, or at most a few hours travel, an abundance 
of unused land on which, if he had free access to it, 
he could make a living more easily than the castaway 
referred to, yet he is often compelled to fold his arms 
and sit in idleness and suffer for want of food in the 
midst of unlimited unused natural opportunities for 
employment. 

When men starve for want of work, it cannot be 
because of the niggardliness of nature. Must it not 



80 The Problem of the Unemployed 

be because of the mal-adjustment of the forces of 
government? 

With an abundance of unused land, freely avail- 
able to capital and labor, growth of population in it- 
self v^rould render the employment of labor more 
profitable, and increase rather than lessen the de- 
mand for labor. Take the case of land a few miles 
from the center of a thriving village. As population 
increases, macadamized roads, telephone and trolley 
car service, good schools and many other public utili- 
ties become available to the laborer employed in cul- 
tivating it. Better markets spring up close at hand, 
and this makes his labor more effective, and in num- 
berless ways co-operation with nearby neighbors 
saves labor and increases the products of his indus- 
try. When the pioneer settles in the wilderness, he 
can make little more than a bare living, no matter 
how fertile the soil, for he must be his own jack of 
all trades. At every step he misses the help and 
assistance which comes from co-operation with oth- 
ers and the division of industry. When thousands 
have settled around him, then, in numberless in- 
stances, he saves energy formerly frittered away for 
small returns, and the efficiency of his labor is im- 
mensely increased. 

Eighty years ago, a few hundred families of Mor- 
mons pushed out into the wilderness, crossed the 
Rocky Mountains, and settling on free land fifteen 
hundred miles beyond civilization, founded Salt Lake 
City. The capital which they carried with them did 
not average one hundred dollars to the family, and 
was represented only by teams and a few agricul- 
tural and household implements. Where but ten 
families would have failed, hundreds of families sue- 



The All Important Question 81 

ceeded. Unaided by outsiders, they quickly brought 
an abundance of capital of their own into existence. 
They constructed roads and irrigation canals and 
ditches, and provided for other public utilities and 
diversified their industries. In the saving of labor 
resulting from co-operation of a large community 
is the explanation in great part of the prosperity and 
success v/hich so speedily rewarded their efforts. It 
must be evident, on reflection at least, that so long as 
there was an abundance of unused lands in the very 
midst of the Mormon community, free of cost to the 
first comer who desired to use it, increase of popula- 
tion would tend to increase the demand for labor in- 
stead of lessening it, because of the inviting fields for 
the investment of capital in the employment of labor 
which these unused lands would afford, situated as 
they v/ould be on good roads, in congenial neighbor- 
hoods, and served by irrigation ditches already con- 
structed. 

While free land may seem an idle dream, the effect 
of it must nevertheless be considered in order to 
ascertain the laws which control the distribution of 
wealth. Thus, given an abundance of raw material 
— of land, freely available — increase of population 
cannot lessen the demands for the product of labor, 
since as population increases, consumption also in- 
creases, and with increase of consumption will follow 
in the same ratio an increased demand for labor. 

It seems, therefore, to be demonstrable that 
neither a real scarcity of land, nor the increase of 
population, nor improvements in labor-saving pro- 
cesses, can be assigned as the reason for involuntary 
idleness, and for the failure of wages to advance 
naturally in proportion to the increasing wealth-pro- 



82 The Problem of the Unemployed 

ducing efficiency of the laborer. As to whether capi- 
tal increases as rapidly as necessary for the full em- 
ployment of labor will be considered in subsequent 
chapters. 



CHAPTER VII. 

OBSTACLES TO EMPLOYMENT OF CAPITAL AND LABOR. 

AGRICULTURE is the primary industry, and 
most important of all industries. About one- 
third of all laborers in the United States are engaged 
in producing wealth directly from the soil. It is the 
occupation in which the workman most easily learns 
to do the work required of him, and to which any 
laborer, whether skilled or otherwise, can quickly 
adapt himself. Under favorable conditions, it is 
attractive alike to the man with small means or large 
means, to the inexperienced as well as the experi- 
enced, and to the ignorant as well as the intelligent. 

The wages of agricultural laborers furnishes the 
standard which gauges, to a large extent, the wages 
of all laborers. If wages on farms are high, wages 
in other lines of employment will be high also, since 
a demand for agricultural labor at high wages will 
retain labor upon farms and even attract it from 
cities and towns, and thus increase the demand for 
labor in other than agricultural pursuits. 

In the settlement of new countries farmers come 
first, and after them follow mechanics and mer- 
chants. Farmers and miners must first be employed 
in the production of the raw material, before those 
who work in stores and factories can have employ- 
ment. The business of the world, with all its ramifi- 
cations and subdivided branches of production and 
distribution, is based primarily on labor applied di- 



84 The Problem of the Unemployed 

rectly to the soil. It is evident that anything which 
obstructs the access of capital and labor to land is 
an obstacle to employment, and it may be sufficient 
to account for much, if not for all, that is evil and 
wasteful in the present industrial system. 

It is also evident that anything which interferes 
with the natural tendency of surplus capital and 
labor to use first the vacant land nearest centers of 
population, before going to more remote and less 
desirable land, is an obstacle to employment. Why 
should farmers, for instance, be forced into the wild- 
erness, while on the outskirts of thriving cities and 
towns and in the midst of well-settled communities, 
there is an abundance of unused land — land on which 
the same amount of labor would produce wealth in 
far greater quantities? 

In the suburbs of every city is to be found a zone 
of almost wholly unused lands, with a few buildings 
scattered over it. It includes the territory between 
the thickly settled portion of the town and the culti- 
vated fields of the adjoining country. Its area is in- 
variably many times greater than that of the city 
proper. As the city grows, this zone widens and en- 
croaches more and more on the surrounding lands in 
cultivation. The price at which land is held within 
these zones prohibits its purchase for any agricul- 
tural use, and besides, the sale of it to speculators 
and investors, in small and isolated tracts, spoils its 
use for such purposes. Nor is it profitable to encum- 
ber these lands with leases which would protect the 
improvements of the tenant farmer, since the rent 
would be trifling in comparison with the value of the 
land. Town lots can generally be raised upon land 
of this character more profitably than vegetables. 



Obstacles to Employment 85 

Hence, such land is often subdivided into lots and 
blocks a generation or more in advance of any eco- 
nomic necessity for it. Not one acre in ten, often 
not one in twenty, between the constantly extending 
lines by which these zones are bounded, is used for 
any productive purpose ; yet on no other lands in the 
country could so much agricultural wealth be pro- 
duced with so little effort. The market would be at 
the farmer's door, and the fertilizing wastes of the 
city equally convenient. It has been found from 
actual investigation that five per cent, or more of 
the working men of any city in the United States 
could be profitably employed in the cultivation of 
these unused lands, if the natural availability of the 
lands for such use was alone to be considered. 

The questions suggested in this connection are 
these : Why should the cultivation of the soil in the 
immediate vicinity of the thickly settled portion of 
every thriving town and city be so largely aban- 
donedy ten or a dozen, or perhaps twenty-five or even 
fifty years, or more, in advance of any real demand 
for it for building sites ? Why should not the culti- 
vation of this, the most valuable of all lands for 
agricultural uses, continue until the very time when 
it is really needed and actually used for building pur- 
poses ? Why must energy be wasted in transporting 
small fruits and vegetables scores and hundreds of 
miles while land in the very midst of consumers lies 
unused and uncultivated? And this suggests other 
questions : Why, in the building of cities and towns, 
are residences on the outskirts scattered over such 
wastes of unimproved lots, when convenience and 
economy, health and happiness would be better sub- 
served by a compact and natural order of settlement? 



86 The Problem of the Unemployed 

In nine cases out of ten, the lot most desirable and 
valuable for a new residence, or a new business build- 
ing, is the first unused or but partially used one to 
be found, counting from those already in use. Why 
should effort be frittered away in passing by such 
unused lots and building sidewalks, roads and sewers 
to those more remote and less conveniently situated ? 
What natural and economic necessity is there for 
such waste of human energy? 

It is not necessary for all, or even any, of the un- 
employed themselves to turn to the soil in order to 
relieve the crowded labor markets of cities and 
towns. If the cultivation of land now vacant were 
really profitable — and that it would be as to much 
of it near the centers of population, but for the enor- 
mous prices demanded for access to it, can admit of 
no doubt — laborers already having employment in 
other lines of business, including those with small 
means, would be attracted to the soil, and in many 
instances would quickly vacate positions in cities and 
towns, to the benefit of the unemployed remaining 
there. 

The willingness of people in every trade and voca- 
tion in life to go to unused land, and live upon it and 
cultivate it when conditions render the cultivation of 
it profitable, is shown, to some extent at least, in 
recent years by the tens of thousands of applications 
made for homesteads when reservations in the In- 
dian Territory were opened for settlement. The 
demand for these unused lands under laws requiring 
use and occupancy far exceeded the supply. While 
this demand was doubtless stimulated by the hope 
of deriving profit from mere increase in value of 
land, yet the settlement of the country would have 



Obstacles to Employment 87 

been little less rapid, had no other inducement been 
held out to landless families than escape from the 
payment of land rent or land purchase money. 

This, then, is the situation: A few laborers are 
always out of work and ready to take the places of 
those who have work. So long as such conditions 
prevail, wages can never rise from natural causes, 
but must always tend to fall. The proportion of the 
unemployed to the employed in every industry is 
probably about the same, but even if this were other- 
v/ise it would be immaterial in view of the ease with 
which labor in any other industry can adapt itself 
to most of the work required in the cultivation of the 
soil. Many of the unemployed have left the country, 
either because of lack of employment, or on account 
of the small wages paid on farms, and are competing 
against laborers in other lines of employment in 
cities and towns. Some of these, as well as those in 
other lines, would gladly turn to agriculture, if as- 
sured of higher wages or better positions. Suppose 
six per cent, of laborers to be unemployed. Now if 
one-third of them, or but two per cent, of all labor- 
ers, went to work as farmers on unused lands, it is 
evident that they would raise food to exchange for 
things which the other two-thirds, at present unem- 
ployed, could produce. A demand being thus created 
for the product of the latter, their employment would 
also follow, and thus all idle men willing to work 
could get work without depriving of work any of 
those previously employed. 

The world never suffers from over-production, but 
always from under-consumption. Millions, with but 
a single suit of clothing each, would gladly buy more 
garments if they had anything to give in exchange 



88 The Problem of the Unemployed 

for them. Mankind would consume more of the 
comforts and luxuries of life, if with unflagging toil 
the wherewithal with which to pay for them could 
be obtained. The idle shoemaker needs clothing, and 
the idle spinner needs shoes, and both need better 
houses, and the idle carpenter needs both clothes and 
shoes, and all need better food and more of it. The 
idle laborer who might be employed on the vacant 
land so near cities and towns, and in the cultivation 
of which the employing capitalist could afliord to pay 
good wages, but for the enormous investment re- 
quired for its purchase, also needs shoes, clothing 
and houses, and so it is in all vocations and callings. 
If the idle shoemaker had work, he could buy clothes ; 
if the idle spinner had work, he could buy shoes ; and 
if the idle carpenter had work, he could buy shoes 
and clothes; and the spinner and shoemaker could 
both live in better houses made by the carpenter, and 
all could eat better food and more of it, produced by 
the laborer working upon these vacant lands. Hence, 
if all who are idle could be thus fully employed, this 
employment would not lessen the demand for the 
labor of those who are already employed, and the 
manufacturer, merchant and all other business men 
engaged in legitimate wealth-producing enterprises 
would participate in the general activity and pros- 
perity which would then ensue. Prosperous times 
always come with increase in the demand for labor, 
and this demand always produces higher wages for 
the laborer. 

Nothing is more fallacious than the notion that 
the amount of work to be done in the world is neces- 
sarily a fixed quantity, and that the employment of 
one man robs another man somewhere of his job. 



Obstacles to Employment 89 

Unless the laborer is employed, he can consume but 
little wealth, for he has little or nothing to give in ex- 
change for it. If he has work, he and the capitalist 
and the land owner, and sometimes others, among 
whom the product of his labor is divided, consume 
as much wealth produced by others as he produces 
himself. This is so because the wealth which he pro- 
duces is exchanged for that produced by others, and 
the demand for labor resulting from this consum.p- 
tion of the product of other laborers exactly equals 
the supply of labor which his own employment af- 
fords. 

The problem of the unemployed would seem to be 
solved, therefore, if only a small additional percent- 
age of the entire laboring population could get work 
upon a very small percentage indeed of the unused 
land. Such lands, suitable for most profitable agri- 
cultural work, are to be found in quantities sufficient 
for this purpose, in large part at least, in and near 
the very suburbs of cities and towns, to say nothing 
of unused or but partially used farming lands in 
every farming community. When times are dull and 
the labor market is glutted, the small capitalist and 
the laborer must often look with longing eyes to the 
nearby unused or but partially used lands. What is 
it which prevents employment upon these lands ? 

It is obvious that there is some obstacle, artificial 
or otherwise, which always prevents the full employ- 
ment of labor. It is also evident, as has been shown, 
that this obstacle is not labor-saving machinery, or 
increase of population, or any real scarcity of land ; 
it is also evident that the removal of the obstacle, 
whatever it may be, would give increased opportuni- 
ties for employment, from which would follow an 



90 The Problem of the Unemployed 

increased demand for labor with increased wages 
for the laborer and increased prosperity in every 
wealth-producing enterprise. 

But it is sometimes seriously urged that the so- 
called high wages insisted on by laborers in this coun- 
try is an obstacle to employment, and that if wages 
were lower the demand for labor v/ould be greater. 
This simply means that if our workers would submit 
to the standard of living prevailing among the work- 
ers of the old world, and thus accept a smaller share 
of the wealth produced by the partnership of land, 
capital and labor, more of them would find employ- 
ment. But why, in the nature of things, should giving 
the land owner or the capitalist more of the product 
increase the demand for the product itself? Without 
an increased demand for what labor produces there 
can be no increased demand for laborers. If the 
scale of wages were reduced the ability of laborers 
to consume would also be reduced, and this surely 
would not tend to increase the demand for things 
produced by laborers. 

The notion that if wages were lower new enter- 
prises would be started, which are now impossible on 
account of the prevailing rate of wages, originates 
from conditions of which the following is an illustra- 
tion: A man is thinking of going into the sawmill 
business in a certain locality. He has no timber 
lands of his own. He finds that stumpage will cost 
him three dollars per thousand and common labor 
a dollar and seventy-five cents per day. On this 
basis he is unable to figure out satisfactory wages 
for himself after allowing interest on his capital, so 
he drops the matter. He tells some newspaper man 
that if he could have employed common labor at the 



Obstacles to Employment 91 

rate of, say, a dollar a day, he would have gone ahead 
with the business. The newspaper man at once 
jumps to the conclusion that the alleged high price 
of labor has blocked this enterprise, and he accord- 
ingly writes about the scarcity of labor, and advo- 
cates the repeal of the Chinese exclusion act. Had 
he inquired into the matter a little further, he would 
have learned that the mill man would gladly have 
paid a dollar and seventy-five cents a day for labor, 
provided the land owner had priced the stumpage 
at, say, $1.50 instead of $3.00 per thousand. The 
land owner held out for $3.00 per thousand, however, 
as land owners do everywhere, because he believed 
that, in a few years any way, he could get that for 
the land and perhaps more. He knew the land would 
increase in value, with increase of population. 

Again, we read occasionally of some mine oper- 
ator, perhaps, who would open up this or that coal 
bed or mineral deposit, if he could get cheaper labor. 
In the first place, there is no economic necessity for 
using such coal beds or mineral deposits, there being 
plenty of better quality or nearer at hand which are 
unused, and from which more wealth could be ob- 
tained with less expenditure of labor. And so it 
will be found in every case where the high price 
of labor is mentioned as an obstacle to the develop- 
ment of the country, that it is the high price of land 
which either directly or indirectly blocks the enter- 
prise, and not the price of labor. In other words, the 
real obstacle is the excessive amount of tribute 
money demanded for the mere privilege of employ- 
ment. 

The fact is, the less the employee gets, the more 
the land owner, and not the employer as such, will 



92 The Problem of the Unemployed 

get in the long run. If employees consented to live 
on starvation v^ages, in the hope of always being 
able to find employment at some wage, they would be 
bitterly disappointed. A general reduction in wages 
could not result in any general increase in the 
demand for labor. If it had the effect, in the first 
instance, of making it profitable to work certain 
coal beds and mineral deposits and lands, which 
would otherwise remain unused, there would follow 
an increased demand for such lands. This would 
increase the price to be paid for access to them, and 
the demand for labor would be the same as before, 
no matter how low wages might fail. The ov^mers 
of valuable lands would alone, ultimately, be bene- 
fited by a reduction in the scale of wages. This bene- 
fit would come to them in the form of increased 
rents, or in the form of increase in the value of 
lands. Nor would more than a few, comparatively, 
of those who own land be thus benefited, since the 
overwhelming majority of land owners in this coun- 
try have greater interests as capitalists and laborers 
than as land owners. 

The conclusion that lowering wages would neither 
increase the wealth of the country at large nor the 
demand for labor, is supported by fact as well as by 
theory. Thus, in the United States, the per capita 
of wealth of the nation is increasing faster than in 
any other of the great nations of the world. Times 
are usually better and the demand for labor is 
greater here than elsewhere, yet wages are higher, 
and there are fewer unemployed in proportion to 
population, than in Europe. Since low wages in 
Europe do not increase the demand for labor, why 
should it be supposed that lowering the scale of 



Obstacles to Employment 93 

wages here would have that effect? The rise of the 
mercury in the thermometer does not produce hot 
weather, neither does the fall of it produce cold 
weather; it simply indicates the condition of the 
weather. In the same way, high wages do not pro- 
duce dull times, nor do low wages produce good 
times, but when times are good, wages rise, and 
when times are bad, wages fall. The scale of wages, 
as it rises and falls, simply indicates whether times 
are comparatively prosperous or otherwise. 

A number of apparently different obstacles to the 
employment of capital and labor can be easily 
pointed out, all of which, however, are fundamentally 
the same. 

It is apparent that until the factor of rent ap- 
peared in the primitive community referred to, 
wages would increase with every invention which 
increased the laborer's power to produce wealth. For 
illustration, let it be assumed that considerable prog- 
ress was made in the arts and sciences before land 
acquired any value. With no opportunity to derive 
an income from land, or to obtain gain by buying 
and selling it, which gain is the same as rent, the 
owner of wealth, in order to obtain any increase 
from it at all, would have been compelled to use it 
as capital, or loan it to one who would use it as such 
in the form of labor-saving appliances. In the con- 
struction and operation of such appliances labor 
would be employed. There would be little or no 
opportunity for the profitable investment of wealth 
except in some enterprise giving employment to 
labor, because wealth could not be invested in the 
purchase of land. The illimitable resources of the 
earth being absolutely free to all, it is obvious that 



94 The Problem of the Unemployed 

competition among capitalists for laborers would 
enable labor to command and receive in increased 
wages a far greater portion of the additional wealth 
produced by improved appliances, to say the least of 
it, than if wealth could be profitably invested with- 
out employing labor. Applying the line of thought 
thus suggested to conditions as they really exist, it 
will be seen that in any event one of the reasons 
why wages do not increase with increased produc- 
tion is because wealth can be profitably invested in 
land — because it can be invested otherwise than in 
the employment of labor. 

In any prosperous country, a certain amount of 
wealth is annually accumulated and saved, which 
must seek investment in some form. Generally 
speaking, there are but two ways in the main by 
which the owner of such surplus wealth can invest 
it so as to derive a permanent income from it. One 
way is to invest it directly or indirectly as capital in 
a wealth-producing enterprise which requires the 
employment of labor and increases the demand for 
labor. This is done where the owner of wealth or 
the bank which has it on deposit uses it or loans it 
to one who uses it in farming, merchandising, min- 
ing, or manufacturing. The other way is to invest 
it in land. The investment in land does not need the 
assistance of labor or require the payment of wages, 
nor does it compel owners of wealth to bid against 
each other for labor. Wealth may be thus invested 
and large gains realized from it without its owners 
paying out one dollar in wages or contributing in 
the slightest degree to the success of any wealth-pro- 
ducing enterprise. It is also a safe form of invest- 
ment, and one attended with little hazard and no 



Obstacles to Employment 95 

annoyance from walking delegates and strikers, 
while every improvement in the arts and sciences 
and in social relations, as well as increase of popula- 
tion, adds to its value. And so, as this surplus 
wealth accumulates and is saved for permanent in- 
vestment purposes, instead of all of it being used in 
the employment of the additional number of laborers 
annually needing employment with increase of pop- 
ulation, only a portion of it is used for this purpose. 
With the remainder, land is purchased for invest- 
ment and speculative purposes only, and not for 
the employment of labor. In fact, land is often 
purchased for the avowed purpose of preventing 
capital and labor from being employed upon it until 
enormous sums can be exacted for this privilege. 

The fact that wealth can be used in the purchase 
of land not only affords an opportunity for its in- 
vestment without giving employment to labor, but 
it often gives land an unreal and fictitious value. 
This, also, constitutes an obstacle to the employment 
of labor. The unused natural opportunity, be it a 
vacant building or manufacturing site, or vacant 
land suitable for a farm, or an unused coal bed or 
mineral deposit, is usually held at a price in excess of 
its present value for any productive purpose. It is 
so held in anticipation of an increase in value from 
increase of population and general social improve- 
ment. The owner of the land and the employing 
capitalist who wants it for some useful enterprise, 
may not agree with each other upon this uncertain 
and speculative value. The land may or may not 
increase in value as rapidly as the owners believe 
it will. Capital, under such circumstances, doubts 
and halts, and the land often continues to lie idle 



96 The Problem of the Unemployed 

and unused on this account. It may be so situated 
in itself, without reference to its price, as to insure 
far greater returns to capital and labor than could 
be obtained from other lands perhaps equally as 
suitable for the purpose intended, but which are 
more remote from markets and centers of popula- 
tion. The fact that one hundred dollars per acre, 
for instance, is sometimes asked for unused land, the 
economic value of which does not exceed fifty dollars, 
because the sanguine owner thinks it will be worth 
one hundred and fifty dollars within ten years, dis- 
courages the investment of capital and the employ- 
ment of labor in its cultivation. It has this effect, 
not only because it requires so much more wealth to 
get hold of the land, but because there is always 
more or less doubt whether it will actually increase 
in value fast enough to make the entire investment 
a paying one. 

Again, wealth in immense quantities is invested in 
land, and especially in unused land, for speculative 
purposes only. This is also one of the greatest ob- 
stacles to the employment of labor. A man with 
money to invest goes into a new country, or to the 
suburbs of cities and towns, and buys vacant land in 
advance of the homeseeker, not to produce wealth on 
it himself, but in reality to prevent others from doing 
so. The land is thus held in idleness until the neces- 
sities of capitalists and laborers compel the payment 
to the speculator of a profit as a reward for the lat- 
ter's forethought in first seizing the opportunity for 
employment which the land affords. The speculator 
must usually be paid a sum not only equal to the 
economic value of the land, regardless of what it may 
have cost him, but also all in addition which anyone, 



Obstacles to Employment 97 

who is willing to gamble in the bounties of nature, 
may believe it to be worth from a speculative point 
of view. 

The disposition, so widely prevalent among all 
classes, to gamble in land gives it an abnormal ficti- 
tious value. The price of unused land is often so 
high as absolutely to prohibit its purchase for use 
in any wealth-producing enterprise. This is the most 
important if not the sole cause of the phenomenon 
known as a financial panic. 

A financial panic occurs, as follows : When, after 
a period of dull times, one of comparative prosperity 
arises, and many people begin to "save money," 
much of the wealth which thus accumulates is natur- 
ally invested in land. It goes into city and town lots, 
and farming lands, and into stocks and securities 
based in large part on the ownership of land, includ- 
ing the ownership of mineral deposits, and the right- 
of-ways and immensely valuable terminals of rail- 
roads, and privileges enjoyed by public utility com- 
panies. Stocks based on land begin once more to 
slowly increase in price, as more and more wealth 
accumulates to be invested in something from which 
ultimate gain or a permanent revenue can be derived. 
Soon prices begin to advance more rapidly. This 
renders such investments attractive from a specu- 
lative and gambling point of view, and prices 
advance with greater and greater rapidity. This 
stimulates further investment, and prices advance 
still more rapidly, and go still higher and higher. 
After awhile a speculative craze takes hold of many 
people, and the prices often reach the point at which 
it is impossible for employers to reap any reward 
in connection with new enterprises upon vacant 



98 The Problem of the Unemployed 

lands, after payment of prevailing rates of interest 
on the amount required in purchasing them. It is 
invariably the case, just before the "boom" bursts 
and the panic begins, that the natural opportunities 
for employment, such as the vacant farming lands 
referred to as held at one hundred and fifty dollars 
per acre, the unused factory sites, mineral deposits 
and water fronts, the idle business and residence 
lots, all become so dear, and so much wealth is 
demanded for the mere privilege of using them, that 
capital sees no profit in giving employment to labor 
in connection with them. Meantime the laboring pop- 
ulation is naturally increasing. Surplus labor result- 
ing from such increase can only obtain work in con- 
nection with these unused lands, which are held at 
prohibitive prices. And rents also advance in sym- 
pathy with the increase in land values. The house- 
holder and business man are required to pay more 
and more to the landlord, and the longer the "boom" 
lasts, the higher and higher is the amount of tribute 
which the land owner demands. Finally when the 
burden upon wealth-producing enterprises can be 
borne no longer, when prices charged for wealth- 
producing opportunities have been so inflated that 
future valuations can be no longer discounted even 
in the mind of the most credulous and optimistic of 
speculators, the crash comes. It usually comes sud- 
denly, but it may come gradually. Its coming under 
existing conditions is as inevitable after a period of 
prosperity as the coming of winter after summer. 

Prosperity means the accumulation of surplus 
wealth, and as such wealth accumulates much of it 
is invested in land. This stimulates the demand for 
land and brings about an advancing real estate mar- 



Obstacles to Employment 99 

ket, and this causes a greater eagerness to own land 
and reap the benefit of advancing prices. This of 
itself produces higher prices for lands and stocks 
and bonds based on land values, and this is followed 
by even greater anxiety to buy. And so, after every 
period of depression, the boom gradually begins over 
again, and rises and continues to rise higher and 
higher until the inevitable collapse is followed by 
dull times and a decline in prices, to be followed after 
awhile again by prosperous times, from which pros- 
peHty itself is developed the force ivhich chokes it. 
The panics of 1837, 1857, 1873, 1893 and 1907 were 
all preceded by great real estate booms, and followed 
by a marked decline in land values. Nor can any 
period of prosperity be continuous so long as condi- 
tions exist which often make it more profitable to in- 
vest wealth in the mere purchase of the opportuni- 
ties for the employment of labor which land affords 
than to invest it in the employment of labor itself. 

The same obstacles to employment which tend to 
lessen the demand for labor, also, in numerous ways, 
compel capital and labor to work to a disadvantage, 
and consequently less wealth is produced from the 
amount of labor expended than would otherwise be 
the case. For instance, a tenant farmer of Illinois, 
after years of economy, becomes a capitalist as well 
as a laborer. Being thus the owner of a small sum 
of money, a team and a few agricultural implements, 
he puts his wife and children and the remnant of his 
scanty furniture into his wagon and starts out to 
find unused land on which his capital and labor can 
be profitably employed. There is plenty of unused 
or but partially used land in the very neighborhood 
which he is about to leave. On this land, owing to 



100 The Problem of the Unemployed 

its proximity to good markets, as well as the fertility 
of the soil, he could produce far more wealth with 
the same amount of labor than on any of the land 
which he is seeking, but the price of it as to him is 
prohibitive. After a weary journey of many weeks, 
during which he passes millions of unused acres, he 
reaches a thriving town on a railroad in Texas. It 
has schools and churches and in its neighborhood are 
fairly good highways. It is the market place for 
the surrounding territory. On the very skirts of this 
town lie plenty of unused and fertile lands. Why 
does he not settle on some of this land, close to town, 
where his family can have the benefit of schools and 
social advantages, and where his crops, when raised, 
will be near a railroad shipping point? Simply 
because the price charged for it is also prohibitive, 
so far as he is concerned. So he drives on twenty 
miles further and settles in a wilderness, remote 
from neighbors and schools and churches, where the 
highways are little more than trails through the 
woods and over the prairies. He contracts for a 
hundred acres of land, at ten dollars per acre. He 
needs the use of every dollar of his little hoard as 
capital with which to provide a rude shelter and 
food for the first year, and so he goes in debt as 
deeply as possible for his land. This compels him 
to apply the money which he saves to the purchase 
price of land, rather than to the purchase of live 
stock and agricultural machinery which would 
enable him to produce wealth with greater ease and 
in greater quantities. He and his family begin sin- 
gle-handed what is always a lonesome and sometimes 
a terrific struggle with unsubdued nature. A trip 
to market with a few eggs or a little butter, or a few 



Obstacles to Employment 101 

dollars worth of vegetables, means the loss of two 
days for himself and team, no matter how little 
there may be to be carried either way. And so 
almost as much energy is wasted in getting his crops 
to market as is spent in raising them. As he hauls 
them over the poor roads, he passes thousands of 
unused acres nearer the market, and perhaps of 
greater fertility, on which his labor would be pro- 
ductive of far more wealth, not alone to his advan- 
tage, but to the advantage of the entire business 
world. And so this farmer may work all his life 
to an unnecessary disadvantage, as millions of other 
farmers in greater or less degree are doing in this 
country at the present time. And this must always 
be so while unused land can be found on which an 
equal expenditure of capital and labor will produce 
more wealth than on land in use. 

The enormous waste of labor and energy seen in 
the case of some farmers being driven into the wil- 
derness, in nearly all farmers being deprived in great 
degree of the benefits of social life, and compelled to 
contend with poor highways in hauling crops over 
unnecessary distances, amounting as it does, in this 
country, to hundreds of millions of dollars annually, 
would be saved if all the unused land nearest centers 
of population were first put into cultivation. Yet 
this is but part of the story. The economic loss re- 
sulting from the same cause is equally great if not 
greater in other lines of industry, and especially 
with the housing of workers of all classes in cities 
and towns. 

We eagerly seize upon every mechanical device for 
saving labor. Trusts and immense aggregations of 
capital are organized largely for this purpose. 



102 The Problem of the Unemployed 

Human ingenuity is taxed to the utmost to invent 
processes by which the greatest amount of wealth 
can be produced with the least expenditure of labor. 
But while on every hand the waste resulting from 
the misuse of land, and the poverty, discomfort and 
misery which this occasions is so obvious, we pass 
the subject by without thought or comment, as 
though such things were in harmony with the 
natural law and required no explanation. 

We laugh at the stupidity of the ant, which, on 
finding a post standing in its path, carries its burden 
up one side of it and down the other, instead of easily 
going around it; yet man's way of using the earth 
in many instances would not appear less absurd 
to a visitor from a world in which obedience to the 
natural law prevailed. Suppose such a being to drop 
suddenly into the tenement district on the East Side, 
in New York City. He would find people huddled 
together like beasts in a stock yard; families with 
children, of all ages and sexes, sometimes occupying 
a single room. And thus, without privacy, comfort 
or decency, babes are born and human beings sicken 
and die. In some instances he would find a thousand 
men, women and children living, or trying to live, 
in six and seven story houses, covering scarcely an 
acre of ground. After he had experienced the noise 
and confusion, and stench and dirt, and the intoler- 
able discomfort of it, for a day and a night, he would 
certainly come to the conclusion that this was a 
much crowded world, and that land was very scarce. 
Imagine, then, his astonishment on ascertaining that 
there were thousands of acres of unused land, and 
nearly two hundred thousand unused building lots, 
within the limits of Greater New York ; that the pop- 



Obstacles to Employment 103 

ulation of the city averaged but twenty-seven to the 
acre ; that much of this unused land, owing to mod- 
ern transportation facilities, was already in effect 
but a few minutes walk from the shops and factories 
in which the bread-winners of the city were 
employed, and that it was easily within the power 
of man to bring it all within the same distance. 

Imagine his surprise, again, on visiting a suburb 
of the city, to see the exact reverse of what amazed 
him so in the tenement district, for here he would 
find people living too far apart, instead of too near 
together. Instead of the lawns and gardens, which 
surrounded many of the houses, adjoining each other, 
and instead of all the improved places being within 
as convenient distances as possible from the near-by 
railroad station, there would be wide and ugly gaps 
of unimproved lands intervening everywhere, with 
signs of "For Sale." For every lot improved within 
the square mile or so tributary to a railway station, 
he would find perhaps ten or twenty unimproved. 
He would find the houses and homes so scattered 
over wide areas that paved streets and sidewalks, 
and sewerage and water, and electric service for all 
of them, would require the expenditure, of ten times 
as much labor as would be necessary but for the 
intervening spaces of unused lots, so often adorned 
with dead cats and tin cans. 

And not only in this suburb of New York, but in 
the vicinity of every city, town and village, he would 
find the same condition. In the aggregate, there are 
tens of millions of people in this country thus need- 
lessly living on muddy streets, with poor sidewalks, 
or no sidewalks at all. They are compelled to fill out 
daily labors with unnecessarily long journeys to and 



104 The Problem of the Unemployed 

from homes and places of business, passing on the 
way dreary wastes of unused lots. Millions are thus 
deprived of numberless social advantages which add 
immensely to the comfort and happiness of life and 
to the efficiency of wealth producers, although there 
is no real economic necessity for it. 

Again, this celestial visitor would often find land 
in which a coal bed or mineral deposit, for instance, 
was so near the surface, or so near tide water, or of 
so rich a quality, that a minimum of labor would 
produce a maximum of wealth, unused and just as 
the savages left it; while in the same vicinity men 
would pass it by and apply effort to the production 
of coal and ore from lands requiring twice as much 
labor to produce the same results. And so, on every 
side, he would see men unnecessarily increasing 
their burdens and displaying as little intelligence, 
apparently, in the use of the land, as the ant exer- 
cised in climbing over the obstacle instead of going 
around it.* 

*A lot of hogs breaking into a field of corn will quarrel over 
it, scacter the corn about, trample it into the mud, and for 
every bushel eaten will destroy ten. Put before them in this 
manner food enough for a year, and it will not last a month. 
In the same way, under existing conditions, when men discov- 
er an extraordinarily rich deposit of some bounty of nature, 
they will often act like hogs, and waste and destroy it as fool- 
ishly and as recklessly. Thus, in 1901, the first paying oil 
well in Southern Texas was brought in on Spindle Top, near 
Beaumont. The oil and gas spouted far above the top of the 
derrick, and the well flowed pure oil at the rate of a hundred 
thousand barrels a day. There was no immediate market for 
this immense production, and no facilities were ready for stor- 
ing and transporting it. Nevertheless, another well was at 
once started near by, and it proved to be as productive as the 
first one. Human beings then, manifesting the disposition of 
hogs, and displaying as little intelligence in conserving and 
making this oil and the gas found with it useful to mankind, 
proceeded to waste and destroy it as hogs would waste and 
destroy a field of corn. 



Obstacles to Employment 105 

The land was divided into small tracts, and subdivided 
again and again into still smaller ones, the subdivisions, in 
many instances, not exceeding a thirty-second part of an acre; 
it was sold and resold, some of it being finally sold at the 
rate of a hundred thousand dollars per acre. In less than two 
years six hundred and fifty oil wells were put down within an 
area of about eighty acres, each well with its equipments 
costing from four to ten thousand dollars, and many of them 
were less than thirty feet from other wells. The waste oil 
was drained away in ditches and burned on the open prairie 
at the rate of 10,000 barrels a day. It was not worth pumping 
into the storage tanks, all of which being connecte:;! directly 
with the gushers were filled to overflowing. Millions of bar- 
rels of oil were sold for five cents a barrel and less. The oil 
field in the distance resembled a closely wooded forest, so 
thick were the derricks, and when one derrick caught fire and 
burned hundreds of others burned also. The field was time 
and time again devastated by fires which swept away hundreds 
of thousands of dollars worth of property. One or two wells 
to the acre would have been amply sufficient to have obtained 
all the oil in the grounds covered by the eighty acres; hence 
the reservoir below holding the gas which forced the oil up 
was needlessly pierced in more than six hundred places by 
more thaii six hundred needless wells. This caused the dissi- 
pation and loss of an immense store of gas. Had this gas 
been properly cared for and left in the ground until needed, 
it not only would have brought the oil to the surface for many 
years as fast as it could have been profitably consumed, but 
the gas would have afforded fuel and light of the value of 
perhaps millions of dollars to the neigliboring city of Beau- 
mont. The wells soon ceased to flow, and expensive pumping 
plants had to be installed. Then salt water appeared in the 
place of oil, and the production of the original field fell, within 
four years, to less than 5,000 barrels a day. 

Over ten millions of dollars were wasted in extracting less 
than fifty million barrels of oil from Spindle Top. 



CHAPTER VIII. 

EFFECT OF A REAL SCARCITY OF LAND ON RENT, 
INTEREST AND WAGES. 

IT being evident, as shown in the preceding chap- 
ters, that low wages and lack of employment can 
not be attributed to labor-saving machinery, nor to 
mere increase of population, nor to any real scarcity 
of land, it will be both interesting and profitable to 
consider what effect a scarcity of land, if it in fact 
existed, would have on rent, interest and wages. 

Imagine the world to consist of an island which had 
gradually attained a population of one hundred mil- 
lions, under conditions similar to those which prevail 
in the real world ; also that this island was capable of 
furnishing food in abundance for only one hundred 
million inhabitants. 

At first, while there was plenty of unused land on 
the island, both employers and employees would be 
largely independent of land owners. If there were 
only ten millions of people, there would be more land 
on which food could be produced at a minimum ex- 
penditure of capital and labor than there would be 
laborers to cultivate it, and fewer employing capital- 
ists and laborers in proportion to the amount of land 
would bid against each other for the privilege of 
using it. This would be the case, of course, not only 
as to agricultural lands and laborers, but also as to 
all lands and all laborers. Hence, it would seem that 
both wages and interest would then be higher than 



Effect of a Real Scarcity of Land 107 

after population had become more dense, and com- 
petition among those vv^anting the use of land more 
intense. 

When the population of the island was ten millions 
there would be only one-tenth as many employing 
capitalists bidding for the use of land, and only one- 
tenth as many laborers seeking employment on it, as 
when the population had increased to one hundred 
millions. As population increased, the demand for 
land would increase in proportion, and competition 
between capitalists and capitalists, and between 
laborers and laborers, for land on which to produce 
wealth, would become sharper and sharper. There- 
fore, a constant increase in the value of land and in 
the price to be paid for the use of it would neces- 
sarily follow. The employing capitalist would be 
compelled to give up more and more of the profits of 
his enterprise to the land owner in order to compete 
successfully with other employers in bidding for the 
privilege of using land; this would tend to reduce 
interest. The employee would also be compelled to 
accept employment at lower and lower wages. It 
would seem, therefore, that the more unused land on 
the island in proportion to population, the cheaper 
the land would be, and the higher interest and 
wages. 

Experience as well as theory proves that this 
would be the case. Thus, when "Uncle Sam" had a 
fertile farm, conveniently at hand, of one hundred 
sixty acres free of price, for every man who would 
settle upon and improve it, land in this country was 
cheap, interest was high, and wages were higher 
than anywhere else in the world. Labor unions and 
strikes were then almost unknown in America, al- 



108 The Problem of the Unemployed 

though common at that time in England. As the 
country become more thickly settled, however, land 
became dearer, interest fell, and wages tended to 
fall ; then came organized labor, strikes, lockouts and 
boycotts. 

The fact that cheap land and high wages go hand 
in hand is a matter of common knowledge and obser- 
vation. In 1901, the Merchants' Association of New 
York sent a committee to Texas to examine its 
resources and economic conditions, and ascertain, 
among other things, whether cotton mills could be 
profitably operated in that State or not. The report 
was unfavorable, for the reason, as stated, that the 
immense bodies of cheap and fertile land which were 
accessible to labor in Texas would attract the mill 
operatives to the more profitable employment which 
agricultural pursuits afforded under such circum- 
stances. It was also stated, as a matter of course, 
that with increase of population and increase in 
the value of lands, conditions would change; wages 
would fall, and doubtless mills could then be oper- 
ated with profit. 

It is interesting to note, in this connection, that 
Charles Dickens, writing of his visit to this country 
in 1842, in "American Notes," states that during his 
entire trip he never saw a beggar. The incidental 
references made by him to the working people of the 
Northern States indicate at that time a compara- 
tively ideal relationship between employer and em- 
ployee. So, also, the speeches in Congress of Henry 
Clay and others during the first half of the last cen- 
tury, in advocacy of a protective tariff, snow a com- 
paratively prosperous and satisfactory condition of 
the laboring population. The argument then was, 



Effect of a Real Scarcity of Land 109 

not that a protective tariff would make wages higher 
or that it was needed for this purpose, but that, 
wages being already so much higher in this country 
than in Europe, the tariff was necessary for the pro- 
tection, not of the working man, but of the manu- 
facturer, "against the competition of foreign pauper- 
made goods." 

The following is a curious example of the univer- 
sally admitted fact that cheap lands cause high 
wages : Edward Gibbon Wakefield, who visited this 
country in the first quarter of the last century, was 
horrified at the "scarcity of labor" in the United 
States, and at the high wages paid for labor and the 
independence of laborers. He sincerely believed that 
the "better classes" who might emigrate to the Aus- 
tralian Colonies should be protected against such 
unpleasant conditions. In order, therefore, to bring 
about in those new countries such "salutary scarcity 
of employment as would give cheap and abundant 
labor," he proposed to the proper authorities that the 
land from the start should be held at a price so high 
as to put it beyond the reach of any of the class of 
farmers who were willing to work with their own 
hands. The money received by the state in this way, 
he proposed to devote to paying the passage to the 
Australian Colonies of suitable immigrants carefully 
selected from the "lower classes." 

A policy of this character was, in fact, to some 
extent, pursued for many years by the English Gov- 
ernment in the disposition of the public lands of its 
colonies. In 1890, however, a radical change was 
adopted in New Zealand, on the coming into power 
of the Liberal party, which has since been in control 
in that colony. The holding of large bodies of land 



110 The Problem of the Unemployed 

in idleness and the investment of wealth in its pur- 
chase was made less profitable by a graduated land 
tax. Laws were also passed, by means of which idle 
lands in private hands could be condemned by the 
government and leased to actual settlers, suitable 
provision being made for the compensation of former 
owners. In this way it became possible for a settler 
to invest safely all of his capital in improvements and 
in the actual cultivation of land, without sinking any 
part of it in its purchase or in the payment of land 
purchase money indebtedness. When this legislation 
was inaugurated New Zealand was, and had been 
for some years before, suffering from acute "hard 
times." A change for the better at once ensued, and 
a period of prosperity immediately began, which was 
not appreciably interrupted by the world-wide panic 
of 1893. In New Zealand today wealth is more evenly 
distributed, wages are higher, and prosperity is more 
nearly universal than in any oth^ country in the 
world. And so it must always be. Where unused 
land is cheap and easy of access, wages must be high ; 
where such lands are dear and hard to obtain, wages 
must be low. What would be the effect on wages and 
trade generally if all unused land, no matter where 
situated, was always cheap and easy of access to cap- 
ital and labor ? 

Recurring to the island, let it be assumed that 
when its population reached one hundred millions, 
every acre of land suitable for the purpose was so 
fully and properly used that the greatest amount of 
food was being produced with the least expenditure 
of labor, just enough of it being obtained to give 
every inhabitant an abundant supply. Under such 
circumstances, so long as the population of the island 



Effect of a Real Scarcity of Land 111 

did not exceed one hundred millions, neither the 
theory of Malthus nor the theory of diminishing re- 
turns could have any application. Up to this time 
there could be no real scarcity of land, because, in 
point of fact, under intelligent husbandry, land with 
constant cultivation becomes more fertile rather 
than less fertile; and this, too, without additional 
net expense to the husbandman. But let the popu- 
lation of the island increase beyond one hundred mil- 
lions, and continue to increase, then for the first time 
in the history of such a world the theory of Malthus 
and the theory of diminishing returns would begin 
to apply under inexorable natural conditions. If 
there were a real scarcity of the raw material which 
land affords, some would have to do without, nor 
could this be wholly avoided by any change in laws 
regulating the right of access to land. Interest and 
wages would then necessarily fall, but this would 
result from the laws of nature, and not from those of 
human enactment. 

Suppose ten million laborers were engaged in pro- 
ducing food on this island when its population was 
one hundred millions. Let the population increase 
20% and twelve million laborers would then com- 
pete against each other for agricultural employment, 
although only ten million could be employed to the 
best advantage. There being no unused land for the 
additional two million laborers to turn to, competi- 
tion among the twelve million for employment would 
become exceedingly intense, and the struggle for 
existence would compel each to underbid the other 
when possible. If the laws of supply and demand 
were allowed to act without restrictions, the wages 
of the lowest class of agricultural laborers would 



112 The Problem of the Unemployed 

inevitably fall to the point at which the laborer could 
hardly subsist. Since a considerable portion of all 
laborers would be engaged in agriculture, it is evi- 
dent that the wages of all other laborers would fall 
in the same proportion. Abnormally low wages in 
one class of employment will cause laborers to leave 
it and crowd into other lines of employment, and 
this will go on until wages in all lines have fallen to 
a corresponding level. If a cause producing, say, a 
50% reduction of wages applies to one-third or even 
less of the laboring population, then the wages of all 
laborers must fall in much the same proportion, and 
when the equilibrium is reached all wages will be 
lower. 

Competitive bids for the use of land, under the 
circumstances, by laborers with barely enough cap- 
ital for self -employment, and by those able to employ 
other laborers, would be influenced also by the low 
rate of wages. This would make land higher ; hence 
the price paid land owners for land, or its use, would 
constantly tend to increase with increase of popula- 
tion, while wages would tend to decrease. The land 
owner would naturally and inevitably in the end get 
the entire product, less the smallest amount on which 
laborers could subsist, and less the least amount of 
interest sufficient to induce owners or holders of cap- 
ital to employ labor. This would be the case except 
as the natural effect of the law of supply and demand 
might be modified somewhat by the causes referred 
to in the preceding chapters. Not only would em- 
ployees bid against one another for employment, but 
parties desiring to use their own or borrowed capital, 
as employers, would also bid against one another for 
the use of land on which to employ labor ; hence the 



Effect of a Real Scarcity of Land 113 

wages of employers as well as employees would also 
fall. In other words, the rewards of efforts on the 
part of employers as well as of employees would 
grow smaller and smaller as the demand for land 
increased. And not only so, but capitalists as such 
would be compelled to accept lower and lower rates 
of interest from employers, in view of the constantly 
lessening opportunities to engage in profitable 
wealth-producing enterprises; hence interest would 
also fall. 

What is stated here as the result of an increasing 
demand for land caused by increasing population, is 
not mere theory. The proof of it is found by com- 
paring wages, rates of interest, land values and 
opportunities for profitable enterprises prevailing in 
thickly settled countries, like England, for instance, 
with those found in thinly settled ones, like the 
United States and the English colonies. 

Wages under conditions resulting from a real 
scarcity of land would thus automatically fall to the 
starvation point, or to a point so low that any fur- 
ther reduction would mean the destruction of the 
laborer, while land values and rent would rise to 
enormous proportions. This would be so, no matter 
to what extent inventions increased the amount of 
wealth produced. The laborer, by means of improve- 
ments in labor-saving processes now undreamed of, 
might be able to produce on an average more wealth 
in an hour, than his forefathers produced in a 
month, yet the portion of it which he would be per- 
mitted to retain would be comparatively trifling, 
provided the law of supply and demand were per- 
mitted to control. This would be the case, no matter 
to what extent increase in the number of hours con- 



114 The Problem of the Unemployed 

stituting a day's work, or improvements in the char- 
acter of the working man and in faithfulness towards 
his employer, added to the amount of wealth which 
he created. But it is absurd to suppose that any 
change for the better in the moral nature of the 
working man would be possible under such condi- 
tions, no matter what efforts were made for his spir- 
itual regeneration. For men would then fight for 
the chance of employment as wolves fight for a bone, 
and even as multitudes of half starved human beings 
now occasionally fight for jobs on the docks of Lon- 
don — and even as working men are already begin- 
ning to fight each other in the same way in free 
America. Note the following newspaper clipping: 

"The nine months' struggle of the machinists 
and boilermakers of the Chicago, Lake Shore <& 
Eastern Railroad against a 10 per cent wage 
reduction is at an end. The company announced 
that if the unions would call off their strike it 
would reinstate as many of the former em- 
ployees as possible at the lower wages. The 
result was a stampede of more than half the 400 
strikers, which caused fighting and brought out 
the police. The company hired 100 of the old 
men. * * * No strike breakers will be dis- 
charged." 

It is apparent that as time passed and the scarcity 
of land increased on the island, the more and more 
miserable and dependent would become the condition 
of the laborer. The relation between land owners 
and capitalists on the one hand (capitalists being in 
large part land owners also), and employees on the 
other hand, would soon practically become that of 
masters and slaves. Society would then be made up 
of millionaires and billionaires on one side, living in 



Effect of a Real Scarcity of Land 115 

luxury such as is now but partially approached, 
whose sordid pleasures would be ministered to by 
armies of cringing servants. On the other side, 
seething millions of working men would fight each 
other like beasts for the mere privilege of employ- 
ment, except as such horrible conditions might be 
alleviated to some extent by the Benevolent Feudal- 
ism of which Mr. Ghent has written. It is also evi- 
dent that these conditions would be approached long 
before there was such scarcity of food as to render 
semi-starvation in the nature of things the necessary 
lot of a single human being. 

Suppose the surface of the earth from pole to pole 
were owned by a single person, or by a corporation 
like the Standard Oil Company. It would then be 
possible for the owner at any time, by simply refus- 
ing to permit the use of lands at present unused, to 
quickly bring about the results above described. The 
refusal of land owners generally to permit the use of 
unused land, except on terms which would give them 
all the wealth which could be produced on it over and 
above what was necessary to enable the laborer to 
live and work, would bring about the same conse- 
quences. Is it clear that preconcerted action on the 
part of land owners must be necessary in order to 
bring about such conditions ? Would not the simple 
law of supply and demand, as population increased, 
suffice to produce them? Who shall say that the 
necessities of the workers, the fact that the unem- 
ployed are even now eagerly bidding for the places 
of the employed, have not already produced condi- 
tions in part like those above described, and that we 
are not rapidly approaching the full measure of 
them? 



116 The Problem of the Unemployed 

Thomas Carlyle once said to an American : "Ye 
may boast o* yer dimocracy, or any ither 'cracy, or 
any kind o' poleetical roobish; but the reason why 
yer laboring folk are so happy is thot ye have a vest 
deal 0* land for a verra few people." 



CHAPTER IX. 

EFFECT OF AN ARTIFICIAL SCARCITY OF LAND ON RENT, 
INTEREST AND WAGES. 

THE ultimate condition of employees, caused by 
the scarcity of land on the island referred to in 
the preceding chapter, would come gradually. The 
investment of wealth in the purchase of land would 
by degrees bring about an artificial scarcity of land, 
with all the effects of a real scarcity, long before 
there was such scarcity in fact. This is what has 
already happened in the real world, for the real 
world differs only from the one in the illustration in 
being an island with fifteen hundred million instead 
of one with a hundred million inhabitants. If we 
open our eyes to the matter, we can see on every hand 
at present the same effects flowing from an artificial 
scarcity of land which would result from a real 
scarcity. 

It was shown in Chapter VI that as yet there is no 
real scarcity of land in any country; that in the 
United States, many times its present population 
could be supported without waste of human labor, 
and that, in fact, probably less than one acre in five 
of the area of this country is so utilized as to produce 
the greatest amount of wealth with the least amount 
of labor. The price, however, at which unused land 
is often held brings about an artificial scarcity of it, 
almost as marked in its effects upon interest and 
wages as if such land were blotted out of existence 
altogether. 



118 The Problem of the Unemployed 

Some years ago, during a ''boom" in California, 
unimproved lands, useful at that time only for rais- 
ing wheat worth sixty cents a bushel, went up to two 
hundred fifty dollars per acre. No farmer could buy 
this land, pay current wages, and make more than 
two or three per cent on the entire investment. It is 
evident that most of such unused land would remain 
unused until the price fell. Let the price fall, how- 
ever, to fifty dollars an acre, and additional plows 
and reapers would begin to move ; let it become free 
land, and in a few seasons labor would be employed 
in the cultivation of nearly every acre of it, and the 
communities in which it was located would present 
unparalleled scenes of prosperity. 

The price which must be paid for unused land cre- 
ates an artificial scarcity of it. That this may con- 
stitute as great an obstacle to the employment of 
capital and labor as a real scarcity, is shown in the 
opening up to homesteaders of the Territory of 
Oklahoma a few years ago. Up to that time, capital 
and labor of white men could not be employed law- 
fully upon this Indian reservation. While this was 
the case, the land in this territory might just as well 
have been covered with ten feet of water, so far as 
its availability for the relief of an overcrowded labor 
market was concerned. This may be said with 
almost equal truth in regard to the unused wheat 
lands in California, so long as the price demanded 
remained at two hundred fifty dollars per acre. And 
so, also, as to all unused lands, if they are held out 
of use to gratify an owner, or if the price demanded 
is so high that after the payment of current wages, 
current interest on the entire investment cannot be 
made. As to lands thus held out of use, it is cor-rect, 



Effect of an Artificial Scarcity of Land 119 

from an economic standpoint, to consider them 
eliminated from the earth's surface. But be the pur- 
chase price great or small, it always helps to create 
an artificial scarcity of land, and this is the greatest 
of all obstacles to the employment of capital and 
labor. It is the one thing, and, as will be shown, the 
only thing, which prevents wages from naturally 
rising with the increasing wealth-producing power 
of the wage earner. 

Oklahoma, with its two million acres, was an unin- 
habited wilderness, with a single railroad running 
through it. In Texas, bordering on the south, and in 
Kansas on the north, there were then, as at the pres- 
ent time, forty million acres and more of unused 
land of equally as good quality, already within set- 
tled and civilized communities, adjacent to improved 
highways, and convenient to schools, churches and 
markets. For this reason, these unused lands of 
Kansas and Texas, found often in thickly settled 
neighborhoods, in themselves presented far more 
inviting fields for the employment of capital and 
labor than the land in the wilderness of Oklahoma. 
In themselves, they offered greater inducements to 
men to leave the congested ranks of labor in cities 
and towns for employment in the cultivation of the 
soil. But the lands in Kansas and Texas were not 
free. The prices at which they were held as effect- 
ually put them beyond the reach of the overwhelming 
majority of homeseekers, including workers in cities 
and towns, who would gladly go to the soil for em- 
ployment if they could improve their condition by 
doing so, as though the lands had no existence, or as 
though they were covered by inland seas. Not so, 
however, as to the free lands of Oklahoma. When 



120 The Problem of the Unemployed 

it was announced that on a certain day and at a 
certain hour, the Oklahoma Reservation would be 
opened to homeseekers in parcels of one hundred 
sixty acres each, free and without price, many times 
as many applications for land were filed as there 
were parcels of it to be distributed. Fifty thousand 
applicants, most of whom had little capital, gathered 
on the borders of the Territory to make a wild rush 
when the signal guns were fired, for the chance — one 
in five — of obtaining an opportunity to apply labor 
directly to the soil. Within a single season after 
this rush occurred, sixty thousand people were living 
on these lands. The law required them to do this, 
and the great majority wanted the land for homes 
and not for speculative purposes. The demand for 
it would have been only a little less intense had there 
been no hope of profiting from its future unearned 
increment. But for the opening up of this land and 
the rendering of it available to capital and labor, a 
majority of these people would now be competing 
against one another and against others for employ- 
ment in cities and towns, and thus assisting in glut- 
ting the labor market. 

And yet there are hundreds upon hundreds of mil- 
lions of acres of unused or but partially used land in 
the United States, on which labor can today be more 
profitably employed than on the Oklahoma lands 
when first opened to settlement. A drive of a few 
minutes to the suburbs and beyond of any city will 
disclose thousands of acres of such land. It is found 
everywhere, inviting the small capitalist and the 
poorly paid laborer to the more profitable employ- 
ment which its cultivation would afford, except for 
the price demanded for access to it. But as to the 



Effect of an Artificial Scarcity of Land 121 

overwhelming majority, this price is prohibitive. 
Yet the price is all which stands in the way of an 
inexhaustible demand for labor upon unused land. 
Otherwise on what reasonable theory can the rush 
for free land to the wilderness of Oklahoma and the 
rapidity of the settlement of that territory be ex- 
plained? What else prevents a rush to unused land 
lying within a few minutes' ride of every idle capi- 
talist and every idle laborer in the country ? 

If these unused opportunities for employment, at 
the very doors of banks congested with idle capital, 
and in the very midst of laborers engaged in cut- 
throat competition for employment, were condemned 
by the government under its power of eminent do- 
main, or otherwise turned loose as the lands of Okla- 
homa were loosened, would labor then have to beg 
for employment, or regard it a favor to be employed ? 
If the employer could invest all his wealth in the 
means and appliances necessary for the employment 
of labor on these unused lands without being com- 
pelled to spend often the greater part of it in the 
purchase of the land itself, would there ever be any 
lack of capital for the full employment of labor — 
would there be any talk then about an insufficient 
wage fund and nonsense of that kind ? As it is now, 
more capital often is required for the purchase of 
places on which to employ labor, than for the pur- 
chase of the tools necessary for its employment. 
Thus, sites alone for the employment of labor in 
Greater New York, if fully utilized, would cost the 
employing capitalists, even at present valuations, 
over four billion dollars. What wonder then that 
labor's share of the product, as well as that of cap- 
ital, is so small comparatively, when land alone in 



122 The Problem of the Unemployed 

great cities is capitalized at the rate of millions of 
dollars per acre, and everywhere else in like propor- 
tion, on the basis of which capital and labor must 
pay tribute for the bare privilege of employment ! 

The overshadowing feature of men's social rela- 
tions is the fact that wages do not keep pace with 
progress ; that wages do not rise in proportion to the 
constantly increasing wealth-producing efficiency of 
the wage earner, and that men willing to work and 
begging for work are so often unable to obtain work. 
These are apparently the most puzzling of sociological 
phenomena, and the ones of all others which the 
political economist is called upon to explain. Yet the 
explanation is as simple and as easily comprehended 
by any one free from prejudice as the explanation 
which Gallileo gave for the movement of the planets. 
It is the great underlying truth on which any correct 
system of political economy must be based, and it is 
this : Wages do not rise, but, on the contrary, nat- 
urally tend to fall, with increase of population, not- 
withstanding increase of wealth, and men beg for 
employment in the midst of idle lands simply because 
wealth can be profitably invested in the purchase of 
unused land. And the reverse of this will be found 
to be equally true : If wealth could not be profitably 
invested in the purchase of land, wages would rise 
and continue to rise with every improvement in 
labor-saving devices. Thus, it will be found that 
improvements, as well as increase of population, 
under free competition and the unobstructed opera- 
tion of the laws of supply and demand, can only in 
the long run increase the value of land and the por- 
tion of the product going to land owners. They do 
not increase either interest or wages, or the portion 



Effect of an Artificial Scarcity of Land 123 

going to capitalists and laborers. This being true, it 
follows that, if it could be so arranged that land 
would get nothing, the entire product would then go 
to capital and labor in the form of interest and 
wages ; and it can be made equally clear that if this 
were done, every improvement which increased the 
efficiency of labor would in the same proportion nat- 
urally and inevitably increase the wages of the la- 
borer. 

If land were made free, by the application of the 
power of eminent domain, and then kept free by the 
application of the taxing power, wealth could not be 
profitably invested in land; then capital as such 
would be absolutely helpless and wholly dependent 
on the labor of employers and employees. Compe- 
tition between capitalists bidding for labor would be 
as intense as it is now between laborers bidding for 
employment. At present, however, capital can snap 
its fingers at labor. It can buy land. This means 
that the man who would otherwise be compelled to 
remain a capitalist can invest his wealth with profit 
in simply buying the privilege of collecting tribute 
from capital and labor. He is not compelled to use 
or permit the use of all of his capital in the employ- 
ment of labor as would otherwise be the case. 

At the end of any period sufficient for its accumu- 
lation, people will have saved, say, fifty million dol- 
lars, and the wealth of the country will have been 
increased to that extent. There will then be addi- 
tional commodities of the value of fifty million dol- 
lars produced by labor, stored in the warehouse of 
the world, to be used and invested so as to produce 
incomes for those v/hose ownership of this additional 
wealth is evidenced by money in their possession. 



124 The Problem of the Unemployed 

Since this wealth has been saved and added to an 
existing stock of wealth, all, or the equivalent of all 
of it, must be invested, in land or in new enterprises 
requiring the employment of labor. Every laborer 
thus employed in a new enterprise or in the enlarge- 
ment of existing enterprises will add to the total 
number of laborers previously employed, and deprive 
none of them of employment. Now, without burden- 
ing the mind by trying to think how it could be accom- 
plished, or whether it ought to be accomplished, let 
it be assumed, for the sake of the argument only, 
that all unused land was free land, and that none of 
this additional fifty million dollars of wealth could 
be invested in its purchase. In other words, that the 
owners of this wealth could not profitably use it in 
buying land. It follows then that practically all of 
it would be invested as capital in labor-employing 
enterprises, and hence labor would be in greater 
demand than would be the case if any part of it 
could be used in buying land. 

Again, since all unused coal beds and mineral 
deposits and unused tracts of land suitable for farms 
and residences and stores and factories, etc., would 
be as free to any one who would use them as were 
the free lands of Oklahoma, the eagerness of cap- 
italists themselves to employ labor so as to take 
advantage of these wealth-producing opportunities 
to be found in every community would also bring 
about a great demand for labor. Nor would labor 
be wasted any longer by the failure of laborers and 
employers to select in every instance the best located 
unused land on which labor could be applied to the 
greatest advantage. 



Ejfect of an Artificial Scarcity of Land 125 

The forcing thus of all wealth for income produc- 
ing purposes to be used as capital ; the removal of all 
the obstacles to the employment of capital and labor 
which have been pointed out, and which would follow 
if unused land were made free, and the enabling of 
the employer in all cases to select from unused land 
the portion of it on which the greatest amount of 
wealth could be produced with the least expenditure 
of labor, would not only result in an increase in the 
demand for labor, but also in an enormous increase 
in the amount of wealth produced. From this would 
follow an increase in the amount of wealth saved, 
and since this could be profitably invested only as 
capital, the wage fund of the world would be in- 
creased in like proportion. With more and more 
wealth thus seeking investment, and with practi- 
cally no other way for its profitable investment 
except as capital in labor-employing enterprises, 
with all unused opportunities open and free of cost 
for the use of capital and labor, how would it be 
possible for rates of interest to rise also, with im- 
provements in labor-saving processes? Such im- 
provements would have the effect of increasing the 
amount of capital to be invested in the employment 
of labor, thus intensifying competition among its 
holders seeking such investments, to the benefit of 
both employer and employee. 

If land were free, therefore, every improvement in 
labor-saving processes would have the ultimate eflfect 
of reducing rates of interest, and since the entire 
portion of wealth produced by human effort which is 
now divided between the factors of land, capital and 
labor, would then be divided between capital and 
labor only, it follows inevitably that the share 



126 The Problem of the Unemployed 

received by labor would also constantly increase, and 
the share received by capital as measured by rates 
of interest would as certainly in the long run con- 
stantly decrease, with improvements in wealth- 
producing processes. And so the laborer, including 
the employer as well as the employee, would finally 
reap the full reward of his labors. 



CHAPTER X. 

LABOR'S DEPENDENCE ON CAPITAL, 

THE obstacles to the employment of capital and 
labor to which attention has been called, arise 
from and are generally supposed to be inseparably 
connected with the private ownership of land. While 
the necessity for such ownership is admitted by 
political economists of the new school, no attempt 
is made by them to disguise the consequences flowing 
from it. And therein lies the difference between a 
true science and a spurious one — between a system 
which explains things and shows the causes of im- 
portant phenomena, and one which confuses things, 
hardly mentions such phenomena, and makes little 
or no. attempt to account for them. 

Of what value is a conglomerate mass of discon- 
nected statements and finely drawn distinctions re- 
lating to sociological topics, thrown together with 
no apparent object in view, and without an earnest 
purpose to get at the causes of the phenomena re- 
ferred to in the introductory chapter of this book? 

Just as learned professors in the days of Galileo 
may have taught varied and confusing systems of 
astronomy without calling attention to the move- 
ments of the planets, so learned professors today 
are teaching varied and confusing systems of po- 
litical economy without showing the fundamental 
difference between property in land and property 
in the fruits of industry. Not so, however, as to 



128 The Problem of the Unemployed 

those of the new school; while proposing no sub- 
stitute for private ownership of land, they do not 
ignore its far-reaching effects on the social relations 
of men. It may be that the evils connected with it, 
which have been pointed out, as well as others 
which will be referred to, are inevitable; it may 
be that the simple change in the application of the 
forces of government hereafter explained, which 
would remove these evils, cannot be sanctioned by 
the moral law without compensation to land owners 
and that the plan suggested later for such compensa- 
tion is impracticable. But even if this be so, why 
should teachers of political economy hesitate to pro- 
mulgate the truth ? Is the fear of arousing an unjus- 
tifiable attack upon property rights a sufficient 
excuse for obscuring the truth? Truth need not 
be denied, because we think it may lead to error. 
Why, then, shrink from a full and frank discussion 
of the effects of private ownership of land on the 
demand for labor and upon the distribution of 
wealth? 

The reader has now a general idea of the trend 
of the argument. Summarized in part, it is as fol- 
lows: Raw material must first be produced from 
land, by farmers and miners, before laborers, who 
handle and fashion it as merchants, mechanics and 
manufacturers, can be employed. There cannot be 
a demand for all the additional workers annually 
seeking employment with increase of population, 
unless the labor of perhaps a fourth of them be 
applied directly to land which was before unused or 
but partially used. It is evident that the higher the 
price demanded, either as purchase money or as 
rent, for access to this unused land, the greater will 



Labor's Dependence on Capital 129 

be the obstacle to the employment of these additional 
workers; the lower the price, the less will be the 
obstacle ; while if no price were charged, and unused 
land were free land, this obstacle to employment 
would disappear entirely. It is also evident that 
legislative forces so applied as to sustain and 
increase the price of unused land must increase the 
obstacles to employment; while the same forces so 
applied as to decrease the price of unused land must 
lessen and ultimately remove these obstacles. 

Political economists of the orthodox school, as 
well as ultra socialists, not only ignore the natural 
effects of the private ownership of land, but also 
the consequent obstacles to employment pointed out 
in the preceding chapters. Many of them insist that 
the scale of wages depends upon the volume or 
amount of capital, and that relief to employees will 
comie and can come only with increase of capital. 
The fact that, as a general rule, in new communities 
where there is the least capital, wages of both 
employer and employee are highest, while in old 
and thickly settled communities where there is the 
most capital in proportion to population, wages are 
lowest, is not referred to; and the connection 
between cheap land and high wages and dear land 
and low wages is hardly noticed. Agreeing with 
the socialists, many teachers of political economy 
apparently hold that wages of employees generally 
are fixed by what labor receives in immense manu- 
facturing establishments where enormous amounts 
of capital are used, and where the subdivision of 
labor is carried to the greatest extreme. Hence 
they teach that labor is abjectly dependent upon 
capital. Like the socialists, they fail to see that 



130 The Problem of the Unemployed 

the scale of wages must be fixed by what labor can 
earn under the simplest, rather than under the most 
complex, conditions of employment. They fail to 
see that the independence of the laborer depends on 
the amount of capital necessarily required to grow 
vegetables rather than on the amount needed for 
the construction of locomotive engines. 

Labor is not, in the nature of things, abjectly de- 
pendent upon capital. Three-fourths or more of the 
products of the farm are still produced with appli- 
ances of the cheapest and simplest character. The 
poultry crop is but a few millions less valuable than 
the wheat crop, while the hay crop sometimes almost 
doubles the value of the cotton crop. The small 
farmer who combines in himself a laborer, landlord 
and capitalist, will always have a greater income 
in proportion to the capital invested and labor 
expended than the so-called capitalistic farmer. The 
old saying that *'He who by the plow would thrive, 
himself must either hold or drive," is as true today 
as regards four-fifths or more of farmers, as when 
first written by Poor Richard a hundred and fifty 
years ago. f The tendency is constantly toward 
smaller farms and more intensive systems of culti- 
vation, i In this connection, of course, a farmer pure 
and simple is referred to, and not a landlord who 
farms other farmers, nor does "capital'^ include the 
wealth sunk in the purchase of the privilege of 
using the land on which the farms are located. 

Four-fifths and more of the farmers of this coun- 
try, each working for himself and independent of 
any employing capitalist or any landlord, will natur- 
ally produce more wealth than if working for large 
capitalists or even for the captains of industry of a 



Labo7''s Dependence on Capital 131 

socialistic commonwealth. While large capital and 
a division of labor may be often necessary in the 
interest of economy to meet competition in the man- 
ufacture and distribution of commodities, very little 
capital is needed in the production of cotton and 
most of the food crops. Neither is the amount of 
capital required for any branch of agriculture so 
large that an industrious and capable farmer could 
not speedily accumulate it with his individual labor 
if he has free access to valuable unused land. This 
has been demonstrated in hundreds of thousands of 
instances on the fertile plains of the West. 

A man with a few dollars' worth of tools and 
means of support for a few months, a comparatively 
trifling amount of capital, and easily within the 
reach of vast numbers of employees in cities and 
towns, could make a bountiful living on the valuable 
unused lands near at hand to which attention has 
been called, without the aid of any other capital, if 
he had free access to them. The importance of this 
fact is ignored by orthodox political economists as 
well as by socialists. 

In order, then, to determine the extent of labor's 
necessary dependence upon capital, we must see how 
the relationship between the two would stand if both 
had free access to unused land. Let us then imagine 
conditions which would prevail if the natural order 
were observed in the use and in the appropriation 
of land. 

If there were no artificial obstacles to prevent it, 
the most fertile or most favorably situated land 
would always be first selected for use. There would 
then be few, if any, of the intervening stretches of 
more valuable unused land between lands in use. 



132 The Problem of the Unemployed 

found on every hand. There would rarely if ever 
be such spaces in cities and towns. Land most con- 
veniently situated and most valuable for use would 
no longer be withheld from use. Capital and laboi- 
would no longer pass by vacant lots and unused 
farming lands, coal beds and mineral deposits, and 
apply energy to lands more remote and naturally 
less valuable. The waste of effort occasioned by 
the present custom would be saved and the aggre- 
gate amount of wealth produced would be vastly 
increased. 

Let it be assumed, then, for the purpose of argu- 
ment only, that the taxing power of the govern- 
ment was so exercised as to make it unprofitable to 
withhold land from the use to which it was best 
adapted, and that no one could afford, as a business 
proposition, to own land without putting it to such 
use. If this were the case, vacant land would always 
be free land. Under such conditions, there would 
be none of the intervening spaces between business 
houses and between residences and between culti- 
vated or improved fields to which attention has 
been called. Moving from the center of any city, 
improved business lots would join improved 
residence grounds, and the latter would join culti- 
vated or improved fields which would extend in 
almost unbroken masses to the unimproved pasture 
lands and unused lands beyond, except as such 
natural order might be modified by difference in the 
fertility of soils or other natural causes. The land 
beyond and adjoining the last improved or culti- 
vated fields would thus be practically free land, open 
to the use of whoever cared to take a deed for it from 
the State, and use and improve it. 



Labor's Dependence on Capital 133 

Let it also be assumed, for illustration only, that 
the tax was so adjusted as to give the government 
approximately the unearned increment or increase in 
value of land resulting from increase of population 
and progress generally. The State would then take, 
in the form of a tax, what the land owner now takes 
in the form of rent, according to the economic defini- 
tion of rent heretofore given. In the division of 
the wealth produced, the portion attributable to land 
as rent would then go to the government in the 
payment of a tax. At present, it goes to an indi- 
vidual in the payment of rent. Of course, the tax 
would be levied on the value of the land alone in 
lieu of all other taxes, without regard to improve- 
ment. The tax on land would be so adjusted from 
year to year as to take practically the entire un- 
earned increment, and hence no one would have the 
slightest desire to accept a patent to land from the 
government for speculation or investment pur- 
poses. Hence, unused land would always be free 
land. When with increase of population, the neces- 
sity for the use of such land arose, no private 
owner would stand in the way of its use, and thus 
the purchase price of unused land, the greatest of all 
obstacles to employment, w^ould disappear. 

Let it be further assumed, for illustration only, 
that under the conditions above shown, there would 
always be free land thus conveniently located for the 
small capitalist and laborer to go to. This land 
v/ould not lie in a roadless wilderness, remote from 
markets, schools and neighbors. It would always 
adjoin a compact and thickly settled community, 
with macadamized roads at every farmer's door, and 
all the social and economic advantages which come 



134 The Problem of the Unemployed 

with density of population. The settler upon it 
would at once become a member of such a com- 
munity, and a participant in its advantages. It 
would be land from which the bulk of the product 
would often go directly to nearby consumers, unaf- 
fected by trusts and com.binations in restraint of 
trade. What such advantages are v/orth is apparent 
from the fact that men will often pay hundreds of 
dollars per acre for raw land thus situated, rather 
than twenty dollars an acre for land equally as 
fertile twenty miles farther from a neighboring city. 
This difference in price arises in part from the fact 
that while a day's labor on the remote land will 
produce, say, a dollar's worth of v/ealth, the sam.e 
amount of labor on the other land will produce, say, 
three times as much. Yet, under the condition 
stated, this three dollar a day land would at first 
be practically rent free. The tax, to begin with, 
would be but nominal. It would only increase as, 
with increase of population and material progress, 
labor applied to the land would become more effect- 
ive, and then the increase of the tax would only be 
sufficient to give the State, instead of the individual, 
the benefit of the unearned increment. The values 
created by the community would thus go to the com- 
munity instead of to individuals. 

With an abundance of unused land so well situ- 
ated to be had on such terms, how absurd to sup- 
pose that labor would then be abjectly dependent 
upon capital, even though plants requiring an invest- 
ment of hundreds of millions of dollars might be 
necessary in many kinds of enterprises ! How could 
the wages of employees in plants of any kind be 
forced below the scale of wages fixed by what labor 



Labor's Dependence on Capital 135 

could make on rent free land? What possible com- 
bination of employing capitalists could compel 
employees to accept less than laborers would make 
on available free lands ? Many laborers would be able 
to employ themselves practically without the aid 
of capitalists, and, speedily creating their own capi- 
tal, they would become personally independent of 
all capitalists. Since agriculture is the simplest, 
most easily learned and most generally followed of 
all trades, the independence of agricultural laborers 
would mean the independence of all laborers. 

The success of vegetable patches on vacant city 
lots proves that the earnings of even common labor- 
ers on valuable free land would exceed those now 
usually earned by ordinarily skilled laborers. No 
one can doubt that with free access to nearby unused 
lands, more labor would be employed, and that labor 
would naturally become less dependent upon capital. 
The unemployed laborer himself might not go to the 
soil, but if conditions were such as to make its culti- 
vation highly profitable to other laborers and to 
small capitalists, enough of his competitors would 
do so to largely increase the demand for his labor, 
no matter what his employment might be. 

It follows then that the extent of labor's depend- 
ence on capital does not rest upon the amount of 
capital required to carry on manufacturing and 
commercial enterprises. It depends simply on the 
amount actually needed to enable the laborer to pro- 
duce wealth on nearby unused lands ; and, exclusive 
of the price of the land, this amount of capital is 
so small as to be within the reach of every laborer 
with moderate forethought and prudence. Labor 
existed before capital, and unaided, it brought forth 



136 The Problem of the Unemployed 

capital. Given free access to unused lands, and the 
laborer would be as independent of the capitalists 
under the most complex as under the most simple 
conditions of society. Experience tends to prove 
this to be true. In new countries, where the least 
amount of wealth is needed for the purchase of con- 
veniently located unused land, wages are highest; 
in old countries, where the most is needed, wages are 
lowest. 

Increase of wages arbitrarily by trade union meth- 
ods, like increase of prices produced by trusts, 
means gain for some and loss for others; but the 
independence of the laborer, when brought about 
naturally by the unrestricted operation of the lav>^ 
of supply and demand, means greater wages for 
emxployers as well as employees, and greater pros- 
perity for workers of every kind. 

The thought thus suggested for the purpose of 
showing to v/hat extent labor is necessarily depend- 
ent upon capital, will be more fully developed in 
subsequent pages. Before leaving it, however, one 
question will be briefly answered. The query is 
this: While the conditions referred to might exist 
and produce the results described, in a nev/ and 
thinly settled country, what application can it have 
to those countries in which there is little or no 
unused or but partially used land suitable for agri- 
cultural purposes? The answer simply is, that in 
every country in the world there is an overwhelm- 
ing abundance of such unused land, and it is not 
likely that there ever will be any scarcity of it, con- 
sidering the probable results of the application of 
science to agriculture. When unused land is not 



Laboy-'s Dependence on Capital 137 

literally close at hand, modern transportation^, facili- 
ties can always make it practically so. 

Where are the thickly settled countries to which 
the question mentioned above is supposed to apply? 
The population of India is but 165 to the square 
mile ; of China, 150 ; Japan, a little more than 360 ; 
France, 188; the islands of Great Britain, 371. The 
population of the State of Massachusetts, which is 
418 to the square mile, slightly exceeds in density 
that of Great Britain. Holland is perhaps the only 
country in the world, except Belgium, where the 
population is more dense than in the State of Massa- 
chusetts, and it has only about 500 to the square 
mile.* 

The census of 1910, regarding land in Massa- 
chusetts, illustrates to a great extent the situation 
in all countries where population is supposed to 
crowd means of subsistence. There are 5,144,960 
acres of land in Massachusetts, of which only 
1,164,501 acres are classed as improved farm lands. 
Thus only about one-fifth of the land in one of the 
most densely populated countries in the world is in 
actual cultivation. A study of the figures presented 
by the census shows that about 1,400,000 acres in 

*The enormous amount of unused land which careful investi- 
gation brings to light in the most densely settled countries is 
shown from the following extract taken from Thomas F. Mil- 
lard's article on "The Financial Prospects of Japan" in the 
September number, 1905, of Scribner's Magazine: 

"It will probably surprise many people to learn that there is 
now only about one-half the arable land of Japan in cultivation. 
Some time before the war the Japanese Government appointed 
a commission to inquire into the state of agriculture in the 
realm, which in due time reported certain facts bearing 
thereon. Commenting upon the findings of this commission, 
one of the leading and more conservative native journals had 
this to say: 'According to the latest statistics compiled by 
the Geological Investigation Bureau of the Department of 



138 The Problem of the Unemployed 

and near cities and towns are unused for any agri- 
cultural purpose whatsoever, on which about nine- 
tenths of the population of the State, or 3,125,365 
people, live. This is enough to give the family unit 
of five people 2.22 acres of land for a home site, 
after allov\^ing one-third of the total area for public 
parks and streets. Yet the lots in actual use for 
residence and business purposes in the cities and 
towns of Massachusetts do not probably average the 
one-tenth part of two and twenty-two hundredths 
acres of land to the family unit of five. But say that 
the allowance per family for home purposes ought 
not to be less than an area of 100 by 100 feet, includ- 
ing business as well as residence lots, and it follows 
that at least six-sevenths of the 1,400,000 acres of 
land referred to is wholly unused. In other words, 
in Massachusetts there are considerably over a mil- 
lion acres of land in and adjoining cities and towns, 
spoiled for any present productive use because its 
owners believe that in the succeeding five, twenty, 
or perhaps fifty years, some of it may be used as sites 
for buildings. The laborer and the capitalist are 
unable to use this land for agricultural purposes 
because of the high price demanded for it, and so 



Agriculture and Commerce, the present total area of culti- 
vatd fields in Japan forms only 13 2-3 per cent of her total 
area. Comparing this with the ratios of cultivated land in 
foreign countries it will be seen that the land cultivated by 
countries in Europe covers from one-third to one-half of the 
total land area. * * * From the above (figures) it will be 
seen that Japan still has 48 per cent, of the total land area 
which can be turned into cultivated land. There is at present 
about five million cho (a cho is equal to 2.45 acres) of culti- 
vated land in the country, leaving some four and a half 
million cho to be still cultivated. Should efforts be made 
to turn this arable land to advantage, the increase of popu- 
lation is little to be feared.' " 



Labor's Dependence on Capital 139 

most of it is practically abandoned to the speculator 
and to the mere land holder. Yet of ail land in the 
State, this, with few exceptions, is the most valuable 
for farming purposes. 

As in Massachusetts, so everywhere in connection 
with thriving cities and towns, an area from five to 
ten or twenty times greater than that on which the 
population would be concentrated under natural con- 
ditions is excluded from use. In Massachusetts 
the amount thus excluded exceeds all the land in 
crop cultivation in the State. 

Had the natural order been observed in Massa- 
chusetts, in the use as well as in the appropriation of 
land — had the land most suitable for use always been 
first used, doubtless most of the farmers of that State 
would now be located on the most valuable and con- 
veniently situated 1,000,000 unused acres in the 
suburbs of cities and towns, instead of upon lands 
remote from centers of population, the remainder 
of the unimproved land in the State would still be 
unimproved, the only difference being that nearly 
all the cultivated lands would then lie adjacent to 
compactly built cities and towns. Of course, this is 
but an approximation of what would really have 
happened, but in the main, the lands of Massachu- 
setts would have been settled in the manner stated. 
The best and most valuable land, considering the 
fertility of the soil and its proximity to centers of 
population, would always have been first used, and 
unused land would always have been the least valu- 
able for use. Under the effects of the taxing power 
applied in the manner which has been suggested, 
the unim.proved land in Massachusetts, amounting 
to millions of acres, would have been practically 



140 The Problem of the Unemployed 

free land, or lands used as pasturage, the tax on 
v/hich would be nominal. And this free land would 
generally have commenced where the cultivated 
fields ended, and where labor could produce as much 
wealth as when it is now applied to land held at 
hundreds of dollars per acre. 

A macadamized road at the -farmer's door vv^ill 
often alone add ten per cent, and more to his gross 
income, and quadruple the fund from which his pos- 
sible savings must come. He can haul his crops 
over it when wet weather suspends work upon the 
farm, and at such times, especially, it facilitates the 
exchange of visits between neighbors, and adds im- 
mensely to the enjoyment of life. It also enables 
him constantly to increase the richness of his soil 
by easily placing upon it the fertilizing m.aterial 
often obtained without price from neighboring cities 
and towns. 

Compare the lot of a man located on land of this 
character with that of the average husbandman on 
his oft mud-bound and storm-bound farm. The 
former has almost all the advantages of a city, 
including perhaps a telephone, a trolley line, and 
electric light and power, and the best of educational 
facilities close at hand ; while the latter lives remote 
from neighbors, schools and churches, deprived not 
only of many economic advantages, but also of social 
pleasures which would add so much to the happiness 
and contentment of himself and family. What won- 
der that so many of the sons and daughters of farm- 
ers crowd the trades and professions in cities and 
towns ! What else could be expected when the social 
instincts of mankind are taken into account? 



Labor's Dependence on Capital 141 

There is no economic necessity for the hard and 
dreary lives v/hich so many farmers and their wives 
and children are forced to live on lonely farms. Less 
than half the money, for instance, now expended in 
the construction and maintenance of dirt roads 
would put macadamized roads and a telephone line 
to every farmer's home, together with electric 
light and power service, if all farmers were located 
on the lands best situated for farming purposes, and 
the remainder devoted to pasture and fruit. Not 
only so, but the same amount of labor wholly applied 
to such lands, under such advantages, would produce 
double and quadruple the wealth at present obtained 
from much of the farming lands in use. 

The enormous areas of unused lands near the 
centers of population is not exaggerated. Careful 
observation will convince the most skeptical on this 
point. Start from the business center of any aver- 
age city in America and note the proportion of 
improved to unimproved, or but partially improved, 
land between two parallel lines a quarter of a mile 
or so apart, running into the country. Extend these 
lines until a region is finally reached where the 
price of land is based upon the wealth which it is 
capable of producing when devoted to agricultural 
uses. Or, in other words, extend them until land 
is reached, the value of which is not inflated by the 
hope of its some time being used for other than 
agricultural purposes. In every instance, it will be 
found that not one acre in fLve, often not one in ten 
or twenty, between these lines, is used for any pro- 
ductive purpose whatever. 

If the natural order of settling upon and using 
land were observed, unused lands would be found 



142 The Problem of the Unemployed 

everywhere in abundance immediately adjacent to 
thickly settled communities. Given conditions under 
w^hich land could not be profitably appropriated in 
advance of any economic demand for it for actual 
use, — let the forces of government be so applied that 
all unused or but partially used land would be prac- 
tically free land, free land then could always be 
found where the laborer upon it would be able to 
enjoy from the very start the social and economic 
advantages of a densely settled community. On such 
land most laborers, as heretofore shown, could pro- 
duce wealth without the aid of any so-called capi- 
talist, and the wages earned by them upon it would 
many times exceed what can now be earned on the 
free land which can only be found at present in the 
heart of a wilderness. 

The necessary dependence of labor upon capital, 
and of the laborer upon the capitalist, can only be 
ascertained when both are supposed to have access 
to free land under the natural conditions which 
have been described. Under such conditions, the 
agricultural laborer would always be practically 
independent of the capitalist as well as the landlord, 
and his independence would bring about the inde- 
pendence of all laborers. Under the natural condi- 
tions thus described, employers would compete for 
the privilege of employing labor, even as laborers 
now compete for the privilege of being employed, 
and wages would rise accordingly. 



CHAPTER XL 

THE WAGE FUND OR PERMANENT WEALTH. 

CAPITAL is not only wealth used to produce 
more wealth, but it is also wealth consumed 
in the production of wealth. The machine, no mat- 
ter how strongly built, finally wears out, and is 
replaced by a new one. Wealth in the form of stat- 
uary may last for centuries, but wear and tear, moth 
and rust and decay finally prevail, and the process 
of consumption as to everything produced by human 
hands is at last completed. If wealth is not being 
consumed as capital, it is because it has reached the 
final stage had in mind during the process of its cre- 
ation, and is being consumed in the gratification of 
human desires with no ulterior aim in view. Thus, 
the reaping machine, which is instrumental in pro- 
ducing the wheat which makes the flour which makes 
the bread, is capital; but the bread on the table of 
the consumer is not capital — it is simply wealth. 

Things of the same class may often be consumed, 
either as capital or as wealth only, according to cir- 
cumstances. The horse dragging the plow is being 
consumed in the production of wealth, and is capital ; 
the horse which merely ministers to the pleasure of 
its owner is being consumed like food, and is not 
capital. The race horse, by its efforts on the race 
track, adds nothing to the stock of wealth in the 
v^orld, although it may enable some men to obtain 
wealth produced by other men. Wealth which is 



144 The Problem of the Unemployed 

not used to produce more wealth may be conven- 
iently referred to as wealth consumed in living ex- 
penses; wealth thus consumed is not capital. Gen- 
erally speaking, wealth is always being consumed, 
either in living expenses, or as capital in the produc- 
tion of more wealth. It is unnecessary to make 
other distinction with respect to it, since all v/ealth 
is either wealth in itself alone, or it is wealth used 
to produce more wealth. 

Wealth saved by individuals takes the form of cap- 
ital, unless invested in land, and most of the wealth 
which is not consumed as fast as produced is used 
as capital. The aggregate amount of capital in any 
community can be appropriately called the wage 
fund of such community or the permanent wealth 
of the community. It constitutes the fund from 
which are drawn the tools and supplies used by 
labor in producing wealth. It is evident, other 
things being equal, that the greater this fund, the 
more tools there are, the greater will be the amount 
of wealth produced, and that whatever tends to 
lessen this fund also tends to lessen the production 
of wealth. 

One of the most important things to be considered 
in connection with the production and distribution 
of wealth, is the simple fact that wealth used as cap- 
ital, and consumed in the production of wealth, 
increases the wage fund of the world or the amount 
of capital in the world, and makes it easier to pro- 
duce wealth, while wealth consumed in living ex- 
penses has the opposite effect ; hence it follows that 
the less consumed in living expenses, the larger will 
be the wage fund, and the more wealth will be pro- 
duced by the same amount of labor. A rich man 



The Wage Fund or Permanent Wealth 145 

may live extravagantly, indulge himself without 
limit in expensive cigars, wines, race horses and 
servants, and spend his entire income on living 
expenses, thus taking from instead of adding to the 
wage fund; while, on the other hand, a so-called 
miserly man with the same income may spend three- 
fourths of it on tenement houses and labor-saving 
appliances of various kinds, and thus add to this 
fund. The expenditures of the miserly man thus 
create as great a demand for labor as the expendi- 
tures of the former; but in the former case wealth 
is simply destroyed, while in the latter case it is 
saved and made useful in the production of more 
wealth. 

The so-called miserly men who economize and save 
are public benefactors, as compared with the less 
provident whose incomes are entirely absorbed in 
living expenses. The miser may not be so popular 
with tailors and retail store-keepers as the spend- 
thrift, but if it were not for the prudence and self- 
denial exercised by the thrifty the wage fund would 
be smaller, rates of interest would be higher, and the 
comforts and luxuries of life would not be so com- 
monly enjoyed. While the senseless extravagances 
of the very rich create a demand for labor, labor 
would not be in less demand if the effort needed for 
the production of things consumed in ostentatious 
display were devoted to things useful in the produc- 
tion of v/ealth. The rich man who spends a million 
dollars, for instance, in the erection of comfortable 
and sanitary tenement houses in the slums of a city, 
creates as great a demand for labor as if he spent it 
all on caterers, jewelers, servants and dressmakers. 
So also, as to the hundreds of millions of dollars 



146 The Problem of the Unemployed 

thrown away annually by the working men of 
America for tobacco, beer and whiskey — ^the demand 
for labor would not be lessened, if this money were 
saved and invested in other things needed by them — 
say, in better houses and additional furniture for 
wives and children ; while fewer men would be em- 
ployed in such event in the liquor business, more 
would be employed as carpenters and furniture 
makers. 

An approach to equality in the matter of incomes 
tends to increase the wage fund or permanent wealth 
of the world, while inequality in this respect tends 
to decrease it. Thus, suppose that 50 out of 1,000 
families in a given community have an average 
income of $15,000 each, while the average income of 
the remaining 950 is but $200 each. It is evident 
that great numbers of the poorer class would then be 
employed as servants in ministering to the pleasures 
of the rich, and would thus merely consume wealth 
without producing it; hence, the wealth produced, 
and the portion of it saved in such a community, 
would be much less than if fewer of the population 
were employed as servants. It is also apparent that 
in such a community energy would be devoted to the 
production of luxuries, which, under different condi- 
tions, would be devoted to the production of labor- 
saving appliances, and nobles would vie with one 
another in splendor of equipages, while peasants, 
for want of horses, would harness women to plows. 
Russia presents an example of conditions which must 
necessarily result from excessive inequalities in the 
distribution of wealth. 

If every family had an income of not less than 
$1,000, there would be comparatively few who, as 



The Wage Fund or Permanent Wealth 147 
personal servants of the rich, would be mere con- 
sumers instead of producers of wealth. More labor 
would also be applied to the production of comfort- 
able houses, barns, domestic animals and agricultural 
implements, and less to the production of palaces, 
jewelry and fine gowns ; hence, the aggregate amount 
of wealth consumed in living expenses would prob- 
ably be smaller; in any event, the amount added to 
the wage fund or permanent wealth of the world 
would be larger. And so, in fact, in countries where 
wages are highest and differences in incomes are 
least marked, the amount of wealth per capita is 
greatest. 

Although, as before stated, the New Political 
Economy offers no substitute for it, private owner- 
ship of land under existing conditions does more to 
check the growth of the wage fund than all other 
causes combined. It not only enables individuals to 
reap the unearned increment which attaches to land 
from increase of population, and also to obtain from 
capital and labor tribute money for its use, but the 
exchange of wealth for land and for the use of land 
often results in the consumption of wealth which 
would otherwise be conserved and added to the wage 
fund. 

Since, however, the money which the grantee or 
the tenant pays for land, or for the use of land, is 
ordinarily spent or reinvested, the question may be 
asked as to how the payment of rent or purchase 
money for land can really lessen the amount of 
capital in the world. The fact that money paid for 
land, or for the use of land, is put into circulation by 
the person receiving it, in the purchase of other 
things, indicates nothing. Money, as heretofore 



148 The Problem of the Unemployed 

explained, is like a warehouse receipt. It only evi- 
dences the amount of one's wealth on deposit in the 
warehouse of the world. It has no more significance 
in the transfer of wealth than the "chips" used in a 
game of poker. Chips keep an account of the trans- 
fer of wealth between gamblers, and money in the 
same way keeps an account of the transfer of wealth 
between those who buy and sell. We care nothing for 
the chips — for the money used for convenience in 
the transaction. We wish to know in this connection 
what ordinarily becomes of the wealth actually given 
in exchange for land, or for the use of land. While a 
portion of it may be used as capital by the grantor or 
the landlord, much of it is alw^ays consumed in 
extravagant living expenses, and wealth in enormous 
quantities is thus destroyed which would otherwise 
be added to the wage fund. It makes mere con- 
sumers of people who would otherwise be producers 
as well as consumers. This will appear from the 
following illustration : 

Some years ago, the lands containing coal beds and 
mineral deposits in Northern Alabama, 99% of 
which v/ere wholly unused, advanced in value within 
a few years from a million to fifty million dollars. 
Now, suppose this land, when it was worth but a 
million dollars, to have been owned by a thousand 
people, who, ten years later, sold it to a thousand 
capitalists for fifty million dollars. If this did not 
in effect occur, it is nevertheless illustrative of and 
differs only in degree from what is constantly occur- 
ring in every civilized community. Here a thousand 
capitalists paid a thousand land owners on an aver- 
age fifty thousand dollars apiece, or fifty million 
dollars in all, for the bare privilege of producing coal 



The Wage Fund or Permanent Wealth 149 
and iron and wealth generally from unused lands. 
Recurring again to the functions of money, and it 
appears that the payment of fifty million dollars for 
this privilege signified that the thousand capitalists 
in effect had teams, furniture, steam engines, tools, 
food, clothing, merchandise and other things innum- 
erable, in the markets of the world, of the value of 
fifty million dollars, which they gave in exchange for 
the land. The money simply evidenced the fact of 
the ownership of this wealth, and when it passed to 
the grantors, it gave the latter power to draw from 
the wage fund of the world, in lots to suit, things of 
the aggregate value of $50,000,000. Had they drawn 
ten million dollars' worth of gunpowder and burned 
it in a grand celebration, the permanent wealth of 
the world would have been lessened to that extent as 
one of the consequences of this exchange of wealth 
for land. The wage fund could also have been dimin- 
ished in the same way by any other extravagance in 
which the former land owners might have indulged. 
Many of them, who would otherwise have continued 
to work and produce wealth, would doubtless then 
have begun lives of ease and luxury with retinues of 
servants to minister to their pleasures. They and 
their servants would thus become simple consumers 
of wealth and mere pensioners on the people at large, 
and the wealth thus squandered would diminish the 
wage fund of the world as effectually as the wanton 
burning of gunpowder. 

The wealth which men acquire from the rent of 
land, or from buying and selling land, is not earned 
by them, but is wealth produced by others, which 
they are permitted to appropriate and withdraw 
from the wage fund and consume, if they choose to 



150 The Problem of the Unemployed 

do so, in living exposes. A man pays $10,000 for a 
tract of land which in course of time he sells for 
$40,000, netting $25,000 on the transaction after 
payment of taxes and all expenses. This gain to him 
of $25,000 — this unearned increment which he indi- 
vidually appropriates — results from increase of pop- 
ulation and the enterprise of the community in which 
the land is situated. He may never have been within 
a thousand miles of it, or done anything to add to its 
value. Nevertheless, the $25,000 profit in the trans- 
action enables him to draw from the storehouse of 
the world, commodities of the value of $25,000, and 
consume them in increased living expenses for him- 
self and family, or otherwise, and reduce the wage 
fund accordingly. Or he may live in idleness on the 
things thus withdrawn, and thereby become a mere 
pensioner, his claim to a pensioner's support resting 
on the fact of his having, years before, succeeded in 
forestalling capital and labor in the purchase of a 
bounty of nature which other people have made 
valuable. 

It may be urged, however, that employers engaged 
in wealth-producing enterprises often live in need- 
less luxury also, and consume wealth which could be 
saved and added to the wage fund. This is true; 
but it does not disprove the fact that the fund would 
be larger if individuals were not permitted to appro- 
priate the rent of land and the increase in the value 
of land. As v/ell might it be said that since there 
are some leaks in a ship which cannot be helped, it is 
useless to consider those which can be stopped. The 
right to collect tribute money, and diminish the wage 
fund by consuming in living expenses wealth pro- 
duced by others, would not accrue to the land own- 



The Wage Fund or Permanent Wealth 151 
ers, but for the burden of taxation being so adjusted 
as to make it often more profitable to invest wealth 
in the purchase of land than in the employment of 
labor. 

There are in the main but two ways in which 
accumulated wealth can be permanently invested 
for income-producing purposes. One way is to invest 
it in effect in machinery, or in other words in capital, 
to be used in the employment of labor — or to loan it 
to those who will use it for this purpose. The other 
way is to invest it in land on which to use machinery, 
i. e., capital. 

For its advantageous employment labor needs cap- 
ital in the form of houses, teams, tools, implements, 
paving upon highways, rails and ties and cuts and 
embankments on railroad rights of way, rolling 
stock, ships and unnumbered other mechanical appli- 
ances produced by human labor ; together with stocks 
of food, clothing and merchandise with which to tide 
labor over from one harvest to another, and from one 
cycle of exchange to the next. The more there are 
of these things which constitute the wage fund, the 
greater will be the prosperity of workers of every 
kind, employers as well as employees. It is evident 
that the more paid for land on which to use these 
appliances, the less will there be left with which to 
purchase the appliances themselves. 

There is no limit to the extent to which capital can 
add to the effectiveness of labor. With more and 
better paved highways, for instance, time and effort 
otherwise frittered away would be available for the 
production of additional wealth. If the wage fund 
were larger, more labor-saving devices would be used 
on the farms and in the factories, shops and homes, 



152 The Problem of the Unemployed 

and more wealth would be produced; yet, strange 
as it may seem, labor is everywhere diverted from 
the making of things which add to the productive 
powers of nations, and in all countries the forces of 
government are so applied as to encourage the pro- 
duction of luxuries and the maintenance of hordes 
of personal servitors. 

Imagine the increase in the wage fund of the 
world, and the increased amount of wealth produced, 
if employing capitalists were not compelled to pay 
land owners such enormous sums for places on which 
to rest the tools of production. In Northern Ala- 
bama, for instance, as much if not more wealth in 
the aggregate was demanded for the privilege of 
using the tools referred to than the tools themselves 
were worth. And so it is everywhere. The aggre- 
gate price demanded for land in every community 
equals or exceeds the value of all the wealth, inclu- 
sive of the capital which rests upon it. On Manhat- 
tan Island the tax assessment rolls show that it 
exceeds it by over two billion dollars. 

It is the size of the wage fund which determines, 
also, the relative strength as well as the relative 
wealth of nations. If employing capitalists were not 
required to buy from individuals the privilege of pro- 
ducing wealth on the soil of Japan, for instance ; if 
the obstacles to the employment of labor which have 
been pointed out were removed, and the wage fund 
of that country permitted to increase as it naturally 
would under such circumstances, the expense of its 
war with Russia would have been a mere bagatelle 
compared with the increased amount of wealth which 
would then be produced. 



The Wage Fund or Permanent Wealth 153 
There may be no help for it, but the burden of 
private ownership of land has a more depressing 
effect upon industry and enterprise than war, pesti- 
lence and famine. The pressure from this burden 
is never relaxed, nor is it lightened by material 
progress ; on the contrary, it is, if anything, intensi- 
fied by it and rendered less endurable. 



CHAPTER XII. 
THE DISTRIBUTION OF WEALTH. 

CAUSES AFFECTING THE DIVISION OF WEALTH BE- 
TWEEN LAND OWNERS ON THE ONE HAND AND 
CAPITALISTS AND LABORERS ON THE OTHER HAND. 
ALSO THE LAW OF RENT AND ITS COROLLARY, THE 
LAW OF WAGES. 

A SIMPLE illustration of the way in which wealth 
is naturally distributed is seen in the case of a 
tenant farmer, who borrows, say, $5,000, and opens 
up a farm on unimproved land, not owned by him, 
but which he leases from another. He uses this 
money to provide himself with buildings, teams, 
implements, supplies, etc., these things being in effect 
borrowed by him from the capitalist who loans him 
the $5,000. He might arrange to pay the capitalist 
interest, the land owner rent, and the laborers wages, 
in wheat raised on the place; but whether he does 
this or sells the wheat and pays them in money, the 
wealth produced on the land is just as clearly divided 
among the factors of land, capital and labor, as if 
these payments were made in kind. Say that he 
raises 2,000 bushels of wheat, which are sold for 
$2,000, of which the land owner gets $300 as rent, 
the capitalist $300 as interest, and the employees 
?r600 as wages, leaving a net gain of $800 to the 
tenant farmer. This gain of $800 is the result of 
iiibor of the tenant farmer. It is the reward received 



The Distribution of Wealth 155 

by the tenant farmer for his industry and enterprise. 
To call any part of it profit, or to give to it any other 
name than wages, is needlessly to introduce a con- 
fusing distinction. It constitutes, however, the wages 
of the employer as distinguished from the wages of 
the employee. 

Before discussing the causes which affect the divi- 
sion of the product between employer and employee, 
it is first in order to consider those which affect the 
amount to be divided; for the portion to be thus 
divided depends on what is left after land has 
received rent and after capital has received interest. 
In the discussion which follows, therefore, rent will 
be separated from the total product, interest will be 
deducted from what is left, and the remainder as 
v/ages will be divided betv/een employer and em- 
ployee. In this way, we can ascertain the causes 
which affect the ratio of the division among land 
owners, capitalists, employers and employees, 
respectively. In the illustration given, wheat, the 
product of the factors of land, capital and labor, is 
sold for $2,000 ; in the division of this product, land 
gets $300, capital $300, and labor gets the remain- 
der. Thus labor receives $1,400, of which the em- 
ployer gets $800 and the employees $600. 

The product of every wealth-producing enterprise 
can be thus divided into as many parts as there are 
factors entering into its production ; and since wealth 
is brought forth by a combination of land, capital 
and labor, the product is naturally divided in the 
first instance into three parts only, one representing 
rent, another interest, and the other wages. Had 
the tenant, in the case cited, owned the capital which 
he used, and thus combined in himself the functions 



156 The Problem of the Unemployed 

of a capitalist as well as a laborer; or owning the 
land also, had he combined in himself the functions 
of landlord, capitalist and laborer, the portions of 
his income attributable respectively to rent, interest 
and wages would have been the same, and could have 
been just as easily ascertained. This has been ex- 
plained in a previous chapter. 

While the division of the product among the fac- 
tors of land, capital and labor is most easily seen in 
the case of labor applied directly to the soil, it can 
nevertheless be observed in all wealth-producing 
enterprises. Whenever the raw material of one stage 
is changed into the finished product of the next, the 
additional wealth thus produced is in effect divided 
among land owners, capitalists and laborers. The 
fact that in many instances there is a remaining por- 
tion appropriated under exceptions to the general 
rule, for which no consideration in the performance 
of service, or in the furnishing of land or capital, is 
given, such as exceptions arising from special priv- 
ileges and combinations in restraint of trade and 
otherwise, has already been alluded to. While it 
lessens the amount to be divided among the factors 
of production, it does not affect the ratio of the 
division. 

Take the stage embracing the period from the time 
when the tenant farmer places the 2,000 bushels of 
wheat in the warehouse of the nearest railway sta- 
tion until it is delivered from an elevator in a distant 
city to the flouring mill. During this period, valuable 
land has been furnished for the storage and trans- 
portation of the wheat ; land has also been furnished 
as sites for the buildings in which merchants and 
brokers have expended mental effort in directing its 



The Distribution of Wealth 157 

transportation and in effecting its exchange for other 
commodities; land has also been furnished for the 
houses in which the laborers lived who had handled 
it, and without which the wheat could not have been 
moved; capital has also been used in the form of 
buildings and railway improvements and other appli- 
ances, including the houses, and labor, both physical 
and mental, has been employed in bringing the wheat 
to the flouring mill, where it is worth, independently 
of any fluctuation in price, say, fifteen cents a bushel 
more than when it left the hands of the farmer. In 
other words, wealth, to the extent of fifteen cents per 
bushel, has been as effectually produced by labor, 
and by the use of land and capital, as in the produc- 
tion of the original wheat itself, and added to its 
original value. This additional wealth of fifteen 
cents per bushel is as surely divided among the fac- 
tors of land, capital and labor, each of which has 
contributed in a measure to its production, as v/as 
the original wheat in effect divided among the same 
factors when it was sold by the tenant farmer for 
$2,000. The fact that money, instead of wheat, is 
paid for the labor and for the use of the land and 
the use of the capital, and that hundreds of thou- 
sands of bushels of wheat are handled in connection 
with the 2,000 bushels, is of course immaterial ; and 
so, also, is the fact that we cannot tell just how 
many cents of this additional wealth per bushel goes 
respectively to land owners, capitalists and laborers. 
It is the fact alone that the division is made which 
is material; for it is evident, for instance, that a 
cause which would decrease rent might, under cer- 
tain conditions, increase the portions going to cap- 
ital and labor ; and a cause which would increase the 



158 The Problem of the Unemployed 

independence of employees might, under certain 
conditions, decrease the employers' portion of the 
share received by labor. 

In the study of the causes which thus affect the 
portions received, respectively, by the various fac- 
tors of production, is found, as stated in Chapter V, 
the key to the solution of the economic problem. 

Land is used by capital and labor, as shown above, 
in producing the finished product as well as the raw 
material. When the farmer sold the wheat, it was 
raw material, and wealth was constantly produced 
thereafter and annexed to it on its journey upon and 
in connection with land occupied by office buildings, 
railroads, elevators, flouring mills, warehouses and 
bakeries, until the wheat was placed on the table of 
the consumer in the form of bread, in which form it 
was worth, say, $3.00 a bushel. The owners of this 
land received pay for its use, and this pay increased 
the cost of the bread just as did the $300 rent paid 
to the owner of the land on which the wheat was 
grown. 

This history of a loaf of bread does not differ in 
any material respect from the history of any other 
article of wealth. Take the coat, the making of 
which begins with wool produced by farmers ; or the 
gown, beginning with cotton which farmers raise; 
take the watch spring, beginning with the ore which 
the miner brings to the surface of the earth ; or take 
the chair, beginning with the timber which the lum- 
berman fells. In these, and in every other like case, 
wealth is produced and added to the raw material 
by means of appliances which come within the defi- 
nition of capital, and which rest on land, and which 
are operated by laborers using lands, just as from 



The Distribution of Wealth 159 

wheat bread is made and finally placed on the table 
of consumers, and in every instance this additional 
wealth is produced by the factors of land, capital 
and labor. 

The amount of wealth of the character referred to 
above, prr-duced on non-agricultural land and im- 
parted to the raw material in its conversion into 
things useful to man, and in delivering them to 
consumers, greatly exceeds the amount of wealth 
embodied in the raw material itself as it comes from 
the hands of farmers and miners. Thus, a bushel of 
wheat, for which the farmer receives, say, a dollar, 
is made into sixty loaves of bread, costing three 
dollars — ^threefold increase. Meat, for which the 
farmer gets five cents a pound, is v/orth perhaps 
three times that sum on the table of the consumer. 
A few pounds of wool, for which the IVrmer is paid 
but a dollar or less, may be worth from five to 
twenty dollars, or more, in th^ coat worn by the 
mechanic, and the cotton whkh the farmer raises 
Is often increased tenfold and more in value when 
it is ready to be consumed as clothing. This is also 
true of iron ore when it has been worked into things 
ready for consumption. And so as to numberless 
other articles, the vs^hvj of the finished product 
vastly exceeds that of the original raw material. 

If we reflect for a moment on the thousand and 
one things consumed and in the process of consump- 
tion by us in our daily lives, and compare the value 
of them with the value of the original material from 
which they have been made, we can hardly fail to 
reach the conclusion that the aggregate amount of 
wealth brought into being by artisans, merchants 
and others of like class, and annexed to the raw 



160 The Problem of the Unemployed 

material furnished by farmers, miners, lumbermen, 
hunters and fishermen, whose labor is applied direct- 
ly to land, is often in the aggregate many times 
greater than that of the original articles when first 
produced. In this connection, it must ever be borne 
in mind, as already shown, that the labor of mer- 
chants and brokers produces and annexes wealth to 
commodities as certainly as that of mechanics and 
manufacturers. 

From all this wealth the toll taken in the form of 
rent by those on whose land it is produced, and 
annexed to the original product, very largely ex- 
ceeds the rent of agricultural lands. This being true, 
then the aggregate value of non-agricultural lands 
ought to exceed the aggregate value of lands in cul- 
tivation in approximately the same ratio. Such is, 
in fact, the case, and if the forces of government 
were so applied as to insure the natural order in 
the use as well as in the appropriation of land, prob- 
ably two-thirds of the lands now in cultivation 
would have no economic rental value whatever. As 
it is at present, probably four-fifths of the rent 
received by individuals is for the use of lands other 
than those in cultivation. The aggregate burden thus 
borne by capital and labor in this country now 
exceeds thousands of millions of dollars annually.* 
That is to say, in Free America, capital and labor 
are now, in effect, paying several thousand million 
dollars every year, not to the government in lieu of 
every species of taxation, but to individuals, as 
tribute money for the bare privilege of employment ! 

One reason for the comparatively slight import- 
ance attached by anarchists, socialists and many pro- 
*See "Natural Taxation," by Thomas G. Shearman. 



The Distribution of Wealth 161 

fessors of political economy to the influence of the 
factor of rent in the distribution of wealth is the 
disposition to associate rent almost exclusively with 
lands devoted to agriculture. In point of fact, under 
natural conditions agricultural lands would hardly 
yield ten per cent of the real economic rent of a 
country like the United States, while under actual 
conditions they yield less than twenty per cent. An- 
other reason for ignoring the subject is the fear of 
encouraging unjustifiable legislation affecting the 
rights of those who are now permitted to appro- 
priate rent for private use. Progress is often re- 
tarded by the notion that truth is sometimes more 
dangerous than error. But be this as it may, the 
faithful student will find in the law of rent the law 
of wages. And he will also find in it the explanation 
of the social paradox of increasing poverty in the 
midst of increasing wealth. For it can be seen 
almost at a glance that if the effect in the long run 
of inventions and material progress is to add to the 
value of land only, and thus increase rent without 
increasing wages, then in this fact is the explana- 
tion of the failure of wages to rise in proportion to 
the increased effectiveness of labor ; while the obsta- 
cles to employment pointed out in Chapter VIII 
afford sufficient reason for men who are willing to 
work being so often unable to find work. 

The economic rent of land is the net income which 
can be derived from its use in a wealth-producing 
enterprise adapted to its location, after capital has 
been paid current interest, and after labor has been 
paid current wages. Rent when capitalized, or the 
economic value of land, is the equivalent of a sum 
of money which, if invested at current rates of 



162 The Problem of the Unemployed 

interest, would produce an income equal to the 
economic rent of the land. Thus, if the economic 
rent is six hundred dollars and interest is six per 
cent, the economic value of the land will be ten thou- 
sand dollars. As already pointed out, however, the 
price at which land is sold generally exceeds its 
economic value, since the prospect of an advance in 
value is usually discounted and added to the economic 
value. 

The rent of land without regard to improvements 
approximates the excess of wealth which it will 
yield above the amount which can be produced with 
the same expenditure of effort on the least product- 
ive land in use, and this excess alone increases nat- 
urally as the efficiency of the laborer is increased by 
the aid of labor-saving appliances. In accordance 
with the law of rent, as stated above, rent, and rent 
alone, or the value of land, is directly increased in 
the long run by improvements in labor-saving ma- 
chinery, growth of population and material progress 
generally. Further illustrations of this, the most 
important truth in political economy, will not be 
amiss. 

Suppose there are three tracts of land situated, 
respectively, one mile, ten miles and thirty miles 
from market, and that the same amount of capital 
and labor is applied to each tract, viz : five hundred 
dollars of capital and the equivalent of one hundred 
days of common labor. Other things being equal, 
most wealth will be produced on the first tract near- 
est the market, less on the second, and least on the 
third, because of the labor involved in hauling the 
crops to market. Suppose the amount of wealth 
produced on the first tract is three hundred dollars, 



The Distribution of Wealth 163 

on the second tract two hundred dollars, and on the 
third one hundred dollars. Of course, the difference 
in the value or desirability of the tracts of land, 
respectively, might as well arise from difference in 
anything else affecting the value. It is evident that 
in America, land on which less than one hundred 
dollars worth of wealth can be produced with the 
use of five hundred dollars of capital and the appli- 
cation of one hundred days of labor, will remain, or 
at least ought to remain, uncultivated. It will be 
assumed in any event, however, that the third tract 
belongs to the class of land which is the least pro- 
ductive of any in use. Applying the law of rent, as 
above quoted, to this land, and it follows that the 
third tract will yield no economic rent, while the 
second tract will yield economic rent to the amount 
of one hundred dollars, and the first to the amount 
of two hundred dollars. Given the prevailing rate 
of interest, and from this data the economic value 
of each of the respective tracts can be ascertained. 
Assuming the rate of interest to be six per cent, and 
it follows that the third tract has no economic value, 
while the capitalized economic value of the second 
tract is $1666, and that of the first is $3333. It will 
be found from observation that the price ordinarily 
paid for land, irrespective of improvements on it, 
is its economic value plus a speculative value often 
added in anticipation of a future increase in real 
value. The economic rent of land which is not de- 
voted to agricultural uses can be ascertained in the 
same way. 

Under the law of rent, which is as unvarying in 
its application as the law of gravitation, the entire 
advantage from location or quality of land naturally 



164 The Problem of the Unemployed 

goes to the land owner, and none in the final adjust- 
ment of the rent to either the laborer or the capi- 
talist. A day's labor on the first of the three tracts 
of land, with the aid of five hundred dollars of 
capital, produces three dollars' worth of wealth, 
while on the second tract it produces only two dol- 
lars' worth, yet the wages paid employees for work 
on the first tract are no higher than those paid for 
work on the second tract. The economic value of 
the first tract, however, is, say, one hundred dollars 
per acre, while that of the second tract is perhaps 
but twenty dollars per acre. When tracts of land 
thus situated, respectively, are rented, the difference 
in the rent collected from each is usually such that 
the tenant on one tract can make no more than the 
tenant on the other; in the long run, this is always 
the case. 

Suppose that one day's labor applied to land on 
which a certain coal bed is located will produce on 
an average fifteen dollars' worth of wealth in the 
form of coal; yet, in estimating the value of this 
land, wages at current rates only will be considered ; 
the same is the case as to the rate of interest on the 
capital necessary for sinking the shafts and operat- 
ing the mine. In fixing the price of the land without 
reference to improvements, at, say, a thousand dol- 
lars per acre, the estimate as to the share of the 
product which labor must have will be no greater 
than would be the case if labor could only produce 
three instead of fifteen dollars' worth of coal in a 
day; nor will interest on the capital employed be 
estimated at any higher rate on this account. Sup- 
pose the coal bed, when the employer bought it at 
the rate of a thousand dollars an acre, was in a 



The Distribution of V/ealth 165 

lawless community, abounding in liquor shops, with 
few schools and no refining social influences, and 
where life was unsafe, and riots and labor troubles 
were common ; and that, within a few years, a change 
for the better ensued, and the people became intelli- 
gent and law-abiding. It would then be safer and 
more desirable to invest capital in the employment 
of labor in this community; there would therefore 
be a greater demand for coal beds there than other- 
wise would be the case, and this would increase the 
price demanded for the land containing them ; hence, 
while neither interest nor wages would rise on this 
account, land values would. Labor as well as capital 
would be attracted to such a community, but land 
owners only in the end would profit by the material 
advantage directly resulting from the improvements 
in the intelligence and morality of the laborers. 

Again, suppose that, owing to inventions after- 
wards discovered, twice as much coal with the same 
labor could be mined as when the unused coal beds 
were bought at the rate of a thousand dollars an 
acre. In estimating what would be paid for the land 
then, however, no more than current interest and 
current wages would be considered. The difference 
resulting from improvements in methods of pro- 
ducing coal, which would increase the output without 
increase of labor, would add to the value of the land, 
and an employer would then have to pay, say, two 
thousand dollars an acre instead of a thousand, if 
the demand for coal remained the same. If the 
employer were fortunate enough to have bought this 
land before the improvement in social conditions or 
in the machinery occurred, he v/ould not on this 
account pay more as wages or receive more as inter- 



166 The Problem of the Unemployed 

est. As an employer, he would continue to pay 
current wages, and as a capitalist he would continue 
to receive current interest; but as a landlord, he 
would demand and receive all the benefit of the in- 
creased amount of wealth produced from the causes 
mentioned, unless prompted to do otherwise by pure 
benevolence or the fear of a strike. Such increase 
of rent would be shown in the increased net receipts 
of the enterprise. Thus, if before the improved 
machinery was introduced the gross receipts were 
$10,000, and after its introduction $15,000, with no 
increase of expenses, $5,000 would represent the 
additional rent collected by virtue of the labor- 
saving appliance and improvements in social con- 
ditions. 

The meaning of the law of rent and the correct- 
ness of the definition given is readily seen when the 
application is made to farming and mining lands; 
reflection, however, will show that it applies with 
equal force and constancy to urban and all lands 
generally. The advantage of location in the city as 
well as in the country always in the long run goes 
to the owner of the site on which the business is 
located, rather than to the man who builds the busi- 
ness up; and while, on an average, misfortune and 
failure more often perhaps than otherwise overtake 
the latter in the end, nothing interferes in thriving 
communities with the steady increase of rent year 
by year, or at least decade by decade. 

What has been said in regard to rent would be 
proved by experience in every instance if natural 
conditions alone controlled. If special privileges and 
the combinations in restraint of trade which usually 
originate in them were abolished, and if free compe- 



The Distribution of Wealth 167 

tition and the law of supply and demand were 
allowed full play, all aberrations and apparent excep- 
tions to the law of rent would quickly disappear. 

It is not claimed, however, that the immediate 
effect of every labor-saving appliance, even under 
natural conditions, would be to enhance the value of 
land to such an extent as to absorb the entire benefit ; 
ultimate results only are referred to. The first effect 
of such appliances in many, if not all, instances, is 
to increase the wages of employers who use them as 
well as the value of the land on which they are used. 
The employer, sometimes called an entrepeneur, or 
enterpriser, by orthodox political economists, often 
reaps a handsome reward for his enterprise in intro- 
ducing new inventions ; but the law of averages, and 
the effect of supply and demand, sooner or later 
reduce his wages to the common level, and in the 
end the land owner gets it all. Thus, in Southern 
Texas and Louisiana, when the improved methods 
in the cultivation and harvesting of rice, to which 
attention has been called, were first introduced, 
small fortunes were rapidly acquired by employers 
while land was only three or four dollars an acre. 
But in a few years these lands advanced to thirty 
dollars an acre ; and then the cultivation of rice was 
no more profitable than the cultivation of cotton; 
the wages of rice raising employers fell accordingly, 
so that land owners in the end reaped the entire 
benefit. 

A novel illustration of the fact that while the 
employer or the laborer may at first profit from an 
advantage suddenly conferred upon some special 
spot of land, the owners themselves quickly reap the 
fruits of it, was seen in recent years in connection 



168 The Problem of the Unemployed 

with one of the slums of London. This particular 
slum was so vile and so conveniently located as to 
attract sight-seers in great numbers during the year 
of the Queen's Jubilee. In consequence of this, alms 
in extraordinary amounts were distributed among 
its wretched inhabitants. Dwellers in other slums 
were thus attracted to this particular one, and fierce 
competition arose for the chance of sharing in this 
golden harvest. Since the tenements v/ere rented by 
the week only, rents at once advanced, and by the 
end of the season the sums paid for the privilege of 
living in these miserable dens were fourfold greater 
than before, and thus nearly all the gifts to tenants 
were appropriated by landlords. In the same way, 
the millions of dollars sent by Irish immigrants in 
this country to relatives in Ireland have simply 
enabled the landlords of Ireland to demand and 
receive higher rents than would otherwise have been 
the case. If, for instance, $10,000,000 were to be 
systematically distributed, year after year, in char- 
ity among the deserving poor of the slums of New 
York, the only effect of it, after a short time, would 
be to increase to that extent the rents of the land- 
lords owning the slums. It would have the effect of 
increasing the demand for tenements in these slums, 
and this increased demand would increase rent. 

And so it is under all circumstances, the price of 
any tract of land, or the rent paid for the use of it, 
exclusive of the use of the improvements, always 
covers every advantage which it may have over any 
other tract, and from such advantage neither cap- 
italists nor laborers, as such, can derive any perma- 
nent benefit — in the end it all goes to the owner in 



The Distribution of Wealth 169 

the additional price charged for it, or for the use 
of it. 

Rent also paralyzes the hand of charity, and ren- 
ders futile all attempts to alleviate the condition of 
the very poor by means of benevolence only. Thus 
the students of a theological seminary in New York, 
having had their attention called to the cold dinners 
eaten from proverbial dinner pails by the laborers 
on a nearby building, concluded to play the part of 
practical Christians. So they appeared on the works 
with hot coffee every noon, until the building was 
completed, and served it to the men gratuitously. 
This act of kindness was duly appreciated. Suppose, 
however, it had been universally emulated, and that 
all laborers working for building contractors in the 
same grade of employment in New York had been 
gratuitously served with hot coffee, or better still, 
v/ith a hot dinner, every day by the charitable rich. 
This would have been equivalent to, say, a ten per 
cent increase in wages. Such an unnatural advance 
of wages would have attracted laborers from other 
places and from other lines of employment, and 
competition among them would have quickly reduced 
wages to the former level. The laborer would then 
have been no better off than before. In fact, he 
would be worse off, for his personal dignity and 
pride of character would have been impaired by the 
acceptance of the gratuity. The employing contract- 
ors would have profited by it at first, however, since 
it would have enabled them to obtain the laborer's 
services ten per cent cheaper, just as, from the same 
cause, the Pullman Car Company is able to hire its 
tip-accepting porters at starvation wages. The char- 
itable dimes and quarters bestowed upon the porters 



170 The Problem of the Unemployed 

are pocketed by the Pullman Company, because it is 
a monopoly; in the case of the building contractors 
in New York the value of charity dinners would, in 
the long run, be pocketed by land owners, since com- 
peting contractors would be compelled to erect build- 
ings somewhat cheaper on account of the reduction 
in wages resulting from this benevolence. 

When the law of rent is clearly understood, the 
reason for the failure of improvements in labor- 
saving processes to increase wages is easily seen. 
Thus, to recapitulate: Under natural conditions, 
v/ealth is divided wholly among the factors entering 
into its production, a portion of it going to labor as 
wages, another portion to capital as interest, and the 
remainder to land as rent. Labor-saving processes, 
and material progress generally, naturally enhance 
the value of land and increase rent only; hence the 
portion going to land owners is increased without 
increase of the portion going to laborers and capi- 
talists. It necessarily follows that labor-saving in- 
ventions do not increase wages, simply because the 
natural effect of them, in the end, is to increase land 
values alone. Since all increase naturally goes to 
land as increase in rent, none of it can naturally go 
to labor as increase in wages, or to capital as increase 
in interest. If land owners get all of it, capitalists 
and laborers can get none of it. What is more simple 
than this ? Yet it is the fundamental truth on which 
the science of political economy is based. It is fool- 
ish to ignore it, or deny it, or shrink from the conse- 
quences which necessarily follow. When all, or 
nearly all, the profit of anything goes to one man, 
or one class of men, none, or but little of it, can go 
to another man, or another class of men. If, under 



The Distribution of Wealth 171 

natural conditions, all the increase of the product 
resulting from improvements in machinery ulti- 
mately goes to owners of ground on which machinery 
rests, then, under such conditions, none of it can go 
to laborers for operating improved machines, or to 
capitalists for furnishing the use of them. 

As already stated, the law of rent is also the law of 
wages, the latter being the corollary of the former. 
Since, under the law of rent, the owner of any tract 
of land finally gets all produced upon it in excess 
of what can be produced with the same expenditure 
of effort on the least productive land in use, it fol- 
lows that labor on any land can only get as wages 
the equivalent of what it could produce on such least 
productive land. In the sense used, however, labor 
includes capital, and wages includes interest. This 
is the case because capital is stored up labor, and 
interest is wages paid for the use of such labor. See 
supra, pages 39-40. In the last analysis, therefore, 
wealth is really the product of but two factors, 
namely, land and labor; and it is divided between 
them as rent and wages. Thus, the $5,000 worth of 
capital represented by the tools, teams, buildings, 
etc., used by the tenant farmer was the product of 
labor, and its use was the application to land of 
stored-up labor. The interest of $300 a year, paid 
for the use of this capital, was wages paid for labor 
or effort, as much so as the money received by the 
hired hands; hence "effort," when applied to land, 
has reference to the labor stored up in the capital 
used upon it, as well as to the labor of those by 
means of whose brains and hands the capital is 
applied. It follows, therefore, that although a cer- 
tain amount of capital and toil may be applied to 



172 The Problem of the Unemployed 

one tract of land, and less capital and more toil to 
another, or more capital and less toil to still another, 
the amount of effort applied to each, respectively, 
is not necessarily different on this account. 

Bearing in mind the meaning of "effort" as used 
here, it is easy to apply the law of wages to the three 
tracts of land situated, respectively, one mile, ten 
miles and thirty miles from market. Let it be 
assumed that this land was subject to conditions 
largely prevailing in the West thirty or forty years 
ago, and that the tract thirty miles from market 
was free land. On the last mentioned tract, the 
equivalent of one hundred days of common toil and 
the use of five hundred dollars of capital produced 
wealth of the value of $100. On this free land, 
then, a certain amount of "effort" produced one 
hundred dollars' worth of wealth, and the entire 
product went to labor as wages, and none went to 
land as rent. But, as shown in the illustration, while 
the same amount of effort produced two or three 
times as much wealth on lands nearer the market, 
no more of the product went to capital as interest or 
to labor as wages, because all the excess went to 
land as rent. Hence the law of wages to the effect 
that labor (meaning effort) on any land receives as 
wages only the equivalent of what it can obtain on 
free land, or the least productive land in use. 

The law of wages, as thus announced and ex- 
plained, states the principle which regulates wages, 
rather than a rule governing in all cases with math- 
ematical accuracy. For practical purposes, it simply 
means that the greater the reward of effort, i. e., toil 
combined with capital, on available free land, or on 
the least productive land in use, the greater will be 



The Distribution of Wealth 173 

its reward on all land and in all kinds of wealth- 
producing employment. Or, to put it differently, 
wages on free land, or the least productive land in 
use, largely if not wholly regulates wages of all kinds 
on all lands. 

That this is true is abundantly proven by experi- 
ence and observation. It is not a mere theory, but 
an indisputable fact. Many of the illustrations 
already given bear it out, and others of the same 
kind could be presented without limit. A striking 
example of it was seen in California in the prosper- 
ous days of placer mining. A man, then, with per- 
haps no more than one or two hundred dollars of 
stored-up labor (capital), represented by his burro 
and the provisions and rude tools which it carried, 
went into the wilderness, staked off his claim, applied 
his own toil and capital to free land, and produced 
on an average $16 worth of gold per day. Here, 
''effort," represented by $200 worth of capital and 
one day's toil, produced on free land $16 a day, all of 
which the laborer retained, none of it going to a 
landlord. So long as the reward for this amount of 
effort averaged $16 per day on free land, it is evident 
that the same amount of effort would not be applied 
for a less reward approximately on any nearby land. 
Some men with an equal amount of capital would 
perhaps prefer to work in town for a reward of $10 
per day, rather than put forth the additional effort 
necessary to overcome the hardships of the wilder- 
ness; but the fact that the wages of Effort were 
enormous when applied to free lands would make 
them enormous when applied to other lands. With 
unlimited free land at hand, landlords could not, by 



174 The Problem of the Unemployed 

advancing rents, compel Effort to accept less on their 
land than could be made on free land. 

While the placer miner averaged $16 a day, the 
wages of common laborers in California were $5 a 
day and upwards, and ordinary mechanics earned 
from $10 to $20 a day. Suppose the returns from 
placer mining had risen from $16 to $32 per day ; it 
is evident that the scale of wages on all nearby lands 
would have quickly doubled. Or suppose the returns 
had fallen to $8 per day ; it is equally apparent that 
wages generally would have dropped accordingly. 
Such rise or fall in wages would have been in accord- 
ance with the law of wages, to the effect that the 
greater the reward of effort on available free land, 
the greater will be its reward on all land. In fact, 
this actually occurred in California. As the placer 
mines became exhausted and the average earnings 
of Effort on free land fell, the reward of effort or 
wages generally on all lands also fell. 

In the United States, for many years, available 
free lands were abundant. A man with, say, a thou- 
sand dollars or even less, could settle on a quarter 
section of such land and make a bountiful living for 
himself and family, none of the wealth produced by 
him being given up to any landlord. It would be 
absurd to suppose that with such openings for the 
employment of capital and labor, a farmer would be 
content to rent land or buy it from another, unless 
he could make as much upon his entire investment 
as upon free land. Hence, the owners of private 
land were forced to sell or rent in competition with 
free land, and the price demanded for privately 
owned land, or for i\^h use of it, was always neces- 
sarily low enough to -iiable Effort to make approxi- 



The Distribution of Wealth 175 

mately as much upon such land as upon nearby free 
land. Wages generally, of both employer and em- 
ployee, including the rewards of effort of every kind, 
were, therefore, higher for this reason in the United 
States than in the older countries of Europe where 
there were no free lands. 

The application of the law of wages in communi- 
ties where there are no available free lands is as 
easily made. Thus, suppose our three tracts of land 
were in England, and that the equivalent of the one 
whose location is thirty miles from the market, 
instead of being free land, had a rental value of $25. 
The net reward of effort on this, the least productive 
land in use, would thus be $75 instead of $100. But 
Effort could get no greater reward on the other two 
tracts, since all produced on either of them, in excess 
of $75, would go to land as rent. If for any reason 
the net reward of Effort on the least productive tract 
were doubled, it would be doubled on the other tracts 
also, and wages on all lands would rise accordingly, 
just as from the same cause wages rose in California 
in the early days of placer mining. 

But why is it that rent free land is not to be found 
in England? It is not because of any real scarcity 
of land, since, as has been shown, there is an abund- 
ance of unused or but partially used land in that 
country. It is because the forces of government 
there, as everywhere, are so applied as to press the 
margin of free land into remote wildernesses so far 
from centers of population that the rewards of Effort 
upon it are seldom more than sufficient for a bare 
subsistence. Labor in England and on the Conti- 
nent is farther from free land than labor in America, 
and for this reason the workers of Europe are com- 



176 The Problem of the Unemployed 

pelled to submit to a lower standard of living, espe- 
cially as regards unorganized labor. Effort, there- 
fore, accepts $75 in Europe when it would insist on 
having not less than $100 in America. The fact, 
however, that there are other countries in which the 
rewards of labor on the least productive land in use 
are greater than in Europe, prevents the standard 
of living in Europe sinking to still lower levels, since 
emigrants seek such countries. Thus it is that free 
lands and cheap lands elsev/here to some extent 
compete with the dear land of Europe, to the benefit 
of the laborers of Europe who do not emigrate, 
thereby lessening competition among laborers there. 
In the United States and in some of the English 
speaking colonies of Great Britain, land is rented 
and sold in competition with free land and immense 
quantities of low priced unused lands; hence land 
owners in these countries are unable to appropriate 
so great a percentage of the product as the land 
owners of Europe ; and here, again, the law of wages 
is proven by experience as well as theory, for wages 
are in fact higher in the Unitod States and in the 
colonies referred to than in the countries of Europe. 
Suppose an island, as large as Europe, and with a 
soil equally fertile, were suddenly to appear in the 
Atlantic Ocean ; also that taxes on this island were 
so adjusted that no land could be profitably withheld 
from the use to which it was approximately best 
adapted, and that hence unused land would continue 
to remain free land until put into use. Can one 
doubt that wages all over Europe would at once 
advance enormously, provided laborers and small 
capitalists were free to emigrate to this island? 
Land in Europe would then have to be rented or sold 



The Distribution of Wealth 111 

in competition with easily available free land, and 
hence the land owner's percentage of the product 
would be decreased and Effort's percentage of it 
increased. 

The opening up of cheap if not free lands in 
Siberia was having precisely this effect on the wages 
of laborers in Russia, when the government of that 
country for this very reason put a stop to it in 1900. 
In that year it was decreed that peasants should only 
be permitted to purchase 30 acres of government 
land to the family in Siberia, while members of the 
nobility were allowed to purchase 6,000 acres apiece, 
at 50 cents per acre. The plan recommended by 
Edward Gibbons Wakefield, nearly a hundred years 
ago, for producing "a salutary scarcity of employ- 
ment," was thus frankly and brutally adopted by the 
autocracy of Russia. 

Since bringing available free land into competition 
with privately owned land must result in increasing 
the rewards of effort on all lands, it follows that if 
the forces of government in Europe, for instance, 
were so applied as to accomplish this result with 
respect to the unused lands of Europe, it would have 
the sam.e effect on wages as the appearance of a new 
continent of nearby free lands. This would be so 
because, as already shown, one-fourth or more of the 
area of Europe can be classed as unused lands, much 
of which v/ould speedily become free land if it were 
m^ade unprofitable to withhold land from use entirely, 
or from the use to which it was approximately best 
adapted. So, also, if the forces of government v/ere 
so applied in America that the second of our three 
tracts of land referred to in the illustration — the 
tract ten miles from market, on which Effort pro- 



178 The Problem of the Unemployed 

duced $2 per day — were brought within the class of 
the least productive lands in use, the net rewards of 
effort upon such lands would be doubled. If this 
were done, then most of the agricultural labor of the 
country would be concentrated upon lands not less 
productive, and the margin of free land in the com- 
munity in which these tracts were situated Vv^ould 
thus be drawn from thirty miles to within ten miles 
of the market. In other words, the distances between 
free land and the centers of population would be 
reduced, and hence the net rewards of effort on free 
land w^ould be increased and wages on all lands and 
in every line of industry would be advanced accord- 
ingly. This increase would not only be the case as 
to wages in America, but if immigration were not 
restricted, it would to some extent increase wages 
in other countries also. Hence the rule already 
stated, that the greater the rewards of labor on the 
least productive land in use, the greater will be its 
reward on all lands. 



CHAPTER XIII. 
THE DISTRIBUTION OF WEALTH— Continued. 

CAUSES AFFECTING THE DIVISION OF WEALTH BETWEEN 

CAPITALISTS AND LABORERS, AND BETWEEN 

EMPLOYERS AND EMPLOYEES. 

AS progress is made in the arts and sciences, the 
unnecessary is eliminated. The movement is 
from the complex to the simple. The rotary, applying 
steam directly to the shaft to be revolved, takes the 
place of the reciprocating engine with its compli- 
cated attachments. In the same way, the real science 
of political economy, eliminating needless terminol- 
ogy, wastes no energy tracing distinctions between 
capital, for instance, and "fixed capital," "circulating 
capital," "productive capital," "consumptive capi- 
tal," "capital goods," and "economic goods;" or be- 
tween employer and "entrepeneur" or "enterpriser," 
between rent and "rent bearers," or between pro- 
duction and "inherent productivity," "diminishing 
productivity," "uniform productivity," "absolute 
productivity," "effective productivity," etc.* 

Beginning with a few clear and comprehensive 
definitions, and insisting that wealth can only include 
things produced by human toil, it assumes that the 
object of political economy is to determine the nat- 

*See "The Disfribution of Wealth," by John B. Clarke, Pro- 
fessor of Political Economy at Columbia University; a typical 
text book on political economy for schools and colleges. 



180 The Problem of the Unemployed 

ural laws which control the distribution of these 
things, and the effect on such distribution of man- 
made laws; that since capital is stored-up labor, 
wealth is the product only of the factor labor applied 
to the factor land; that this product is naturally 
divided between these two factors only — rent to land 
and wages to labor, interest being but the wages of 
stored-up labor ; that rent is tribute extorted by priv- 
ilege, while wages is reward bestowed upon effort; 
that under present conditions, all advancement in 
the arts and sciences, in labor-saving processes, in 
good government, in public and private morality, 
increases the tribute extorted by privilege without 
increasing in a corresponding degree, if at all in the 
long run, the reward bestowed upon effort;* that 
the portion of the reward of effort which goes to 
labor as wages is divided between employer and 
employee, and that this is so, even when the worker 
is his own employer. Showing the causes in the first 
place which affect the division of wealth between 
land owners on one hand and capitalists and laborers 
on the other hand, it next in natural sequence treats 
of the causes affecting the division between capital- 
ists and laborers, of the portion going to capital and 
labor, and then between employer and employee of 
the portion going to labor alone. 

But little now remains to be added to this chapter. 

Capital is something which in itself is dead and 
inert. The capitalist is simply the owner of capital, 
just as the landlord is the owner of land ; the former 
receives interest for the use of capital, just as the 

*In other words, it makes land more valuable without in- 
creasing rates of interest or the wages of employers and 
employees. 



The Distribution of Wealth 181 

latter receives rent for the use of land. Supply and 
demand regulate both interest and rent. With in- 
crease of population and improvement in the arts, 
the demand for capital increases, but there is no 
increase in rates of interest, because the supply of 
capital increases as fast if not faster than the 
demand for it. Every additional emigrant coming 
to this country, as well as every child born here, has 
two hands with which to produce capital, and all 
inventions and improvements which make it easier 
to produce wealth tend to increase the amount of 
capital. Not so, however, as to land ; the demand for 
it is constantly increasing, but the earth's surface 
cannot be increased to the extent of a single acre; 
therefore, although rates of interest may fall, rent 
must rise. While there is a natural monopoly of land 
which becomes more intense as population increases, 
there can be no natural monopoly of capital; since, 
with free access to unused land, labor speedily cre- 
ates and accumulates its own capital. 

In new countries two things combine to make 
interest rates higher than in old and thickly settled 
ones ; the scarcity of capital and the attractive oppor- 
tunities for its investment resulting from the cheap- 
ness of land. While high rates of interest attract 
capital from one locality to another, the real or sup- 
posed insecurity of its investment in new countries, 
v/here the demand for it is greatest, retards its flow 
to such countries, and delays the establishment of a 
common level of interest between countries or com.- 
munities in which land is cheap and those in which 
it is dear. But the rapidity with which wealth is 
produced, when labor has comparatively easy access 
to the bounties of nature, brings about a rapid in- 



182 The Problem of the Unemployed 

crease in the volume of capital in countries where 
this is the case, and reduction in rates of interest 
quickly follows. Thus, in the United States today, 
while labor is better paid, and the rewards of effort 
on the least productive lands in use are greater than 
in England, the government borrows money for 3% 
and less, and rates of interest generally are little if 
any higher than in that country, when the security 
is equally as satisfactory. A comparison of rates of 
interest and wages in New Zealand with those in 
England leads to the same conclusion. While it is 
true that the high price of land, and especially of 
unused land, tends to reduce rates of interest, 
because of its paralyzing effect upon industry, never- 
theless the removal of the obstacles to employment, 
to which attention has been called, would ultimately, 
as already shown, so enormously increase the wage 
fund or permanent wealth of the world that rates of 
interest, with increase of wealth, would inevitably 
decline. Therefore, if rent were appropriated by 
taxation and equitably distributed in defraying the 
expenses of government, labor-saving machinery 
and improvements of every character would result 
in directly increasing the portion of the product 
going to labor, including the wages of employees as 
well as those of employers. 

Employers who are mainly interested as laborers 
and capitalists (using their own or borrowed cap- 
ital) must be considered apart from those who derive 
important advantages from rent, or from special 
privileges or combinations in restraint of trade. The 
price of the product charged by them is fixed by 
monopoly, and where this is the case, fluctuations in 
wages have little to do with the price demanded. 



The Distribution of Wealth 183 

Thus, while the mine-owning employer gets more for 
coal now than he did twenty years ago, he pays his 
employees no higher wages ; in fact, as a rule, miners 
probably are paid less now than formerly. A general 
increase in wages, however, is often used as an 
excuse by monopolists for advancing prices, and any 
argument in favor of destroying monopoly, or regu- 
lating its charges, is frequently met with the asser- 
tion that a reduction in prices v/ould cause a reduc- 
tion in T%^ages; nevertheless, there is no real con- 
nection between wages and the prices of articles 
controlled by monopolies, or the charges made for 
services rendered by them. A reduction in the wages 
of employees of a gas company is never caused by a 
reduction in the price of gas. The employer, whether 
a monopolist or not, pays as little as he can, and a 
gas company reduces the wages of its employees 
whenever it can, whether forced to reduce the price 
of gas or not. The wages of an employee depends, 
not on what his employer can afford to pay, but on 
what he is compelled to pay. This is the natural 
relation of employer to employee, though it is often 
tempered by kindness and sympathy. 

A tariff -sustained trust may enable an employer tu 
sell steel rails at double the cost of manufacture, and 
to accumulate an individual fortune of hundreds of 
millions ; but the laborer who assists in manufactur- 
ing protected rails receives no higher wages than his 
fellow-laborer across the way who assists in making 
unprotected brick. Were, for instance, the tariff of 
75 cents per ton on anthracite coal removed, so that 
the coal of Nova Scotia could compete with that of 
Pennsylvania, coal could be cheaper; but the wages 
of miners would not fall on this account. A reduc- 



184 The Problem of the Unemployed 

tion in the price of coal would simply reduce the 
profits of monopoly, including the incomes of those 
who own the coal beds ; but, since a reduction in the 
price would be followed by an increase in the con- 
sumption of coal, the demand for the labor of miners 
would be increased, and this would have a tendency 
to enhance rather than to reduce the wages of miners. 
¥/hen the quinine monopoly was destroyed by the 
removal of the tariff many years ago, there was no 
reduction in wages. On the contrary, the reduction 
in the price of quinine from several dollars an ounce 
to but seventy-five cents, stimulated its consumption, 
and more than doubled the number of laborers em- 
ployed in its manufacture. It is absurd to suppose 
that the putting of typewriters, for instance, on the 
free list v/ould affect the scale of wages paid by the 
typewriter trust. In fact, if the trust sold type- 
v/riters in this country for ?65, the price at which 
it sells them abroad, a greater number of typewriters 
would be used, and the demand for labor employed 
in manufacturing them would be increased ; and this 
would also tend to enhance rather than depress 
wages. If street car companies in great cities were 
allowed to charge but three cents where they now 
charge five, the effect would simply be to render the 
franchises of these companies less valuable. Stock- 
holders could not recoup themselves by reducing the 
wages of employees. On the contrary, a reduction 
in the price of the service would tend to increase 
wages, since the increased amount of business 
brought about by the reduced rates would increase 
the demand for street car employees. In the same 
way, if vesting the Interstate Commerce Commission 
with power to fix rates would have the ultimate effect 



The Distribution of Wealth 185 

of reducing freight and passenger charges, the busi- 
ness of railroads would be to some extent increased. 
This would necessitate the use of additional railroad 
employees; hence, while reduction in rates might 
make railroad companies less able to pay prevailing 
wages, the necessity of employing more laborers 
would increase rather than decrease the difficulty of 
reducing wages.* 

And so, as could be shown by numberless other 
illustrations, in every enterprise in which the price 
of the product or the price of the service rendered is 
not fixed by free competition, a reduction in price 
can in no way affect wages; it can only lessen the 
margin of profit to the land owner and the monopo- 
list. This is so because, while the price of the prod- 
uct is arbitrarily fixed by a monopoly, the wages of 
employees are fixed, not by the demand for labor on 
the part of a few employers, but by the demand on 
the part of all employers, and the few must accom- 
modate themselves to the scale of wages established 
by the general demand, whether they feel that they 
can afford to do so or not. 

Considering now the employer as an employer 
only, or, in other words, as a laborer who employs 
other laborers and vv'ho uses his own or borrowed 
capital, it will be found that his wages (popularly 
called profits) are not in the long run lessened by a 
general rise, nor are they increased by a general fall 
in the scale of wages of employees. In this connec- 
tion, reference is of course made to the portion of 
the employer's income attributable only to interest 

*The great reduction in railroad rates in Texas, brought 
about many years ago by a fearless railroad commission, did 
not lessen the wages of railroad employees in that State. 



186 The Problem of the Unemployed 

and to labor; it does not include the portion which 
may be due to rent, or to special privileges, or com- 
binations in restraint of trade. When the wages of 
carpenters, plumbers and painters, for instance, are 
either increased or decreased, employers regulate 
their bids accordingly, and the contractor's profits 
or wages are unaffected. And this is so as to mer- 
chants and manufacturers and employers in ail 
enterprises in which the price of the product is reg- 
ulated by the cost of the labor employed in produc- 
ing it. In fact, as a general rule, the profits or 
wages of employers are highest in countries v/here 
the wages of employees are highest. Thus, employ- 
ers make greater profits, or higher wages, in Amer- 
ica than in Europe, although employees are paid 
more here than there. 

The non-monopolistic employer is forced by com- 
petition to reduce the price of his products to the 
lowest point which will admit his remaining in busi- 
ness. And vast numbers of employers, after losing 
more or less capital, are being constantly forced out 
of business altogether. It is impossible for com- 
petitive employers to pay more than current wages ; 
and when one competitor succeeds in reducing 
wages, all are compelled to do likewise; for, hov/- 
ever well disposed an employer may be, he cannot 
avoid the effects of the law of rent and the law of 
wages. If he attempted to do so his competitors 
would quickly force him out of business. 

The wages of employers, as such, when the losses 
of the unsuccessful are taken into account, are not 
excessive. The average income of a business man, 
if it includes only interest on the capital used and 
payment for services rendered, is no more burden- 



The Distribution of Wealth 187 

some to employees than interest paid for the use of 
labor-saving machinery. The law of supply and 
demand fixes the wages of the skilled manual laborer 
at considerably more than that of the unskilled 
laborer ; yet it doubtless gives to each approximately 
the correct proportion of the wealth which he pro- 
duces, reference being had not to the amount of the 
wealth to which each may be entitled, but to the 
proportion in which it is divided between them. And 
so, as between the employed laborer and the employ- 
ing laborer, the same law of supply and demand 
probably fixes the compensation of each, near the 
point which gives to each the proper proportion of 
the wealth produced by each respectively. If the 
scale of wages generally were raised in the manner 
suggested in this work, the wages of those who 
employ as v/ell as of those who are employed would 
be raised; but, on account of the general improve- 
ment in morals, education and intelligence which 
would ^then follow, the same law of supply and de- 
mand would, in the end, decrease the difference 
between the wages of skilled and unskilled and em- 
ployed and employing labor. This would come about 
because the proportion of laborers qualified for the 
highest character of service, and to whom capitalists 
could safely intrust the use and management of 
capital, would be increased. 

When Friday landed on Robinson Crusoe's island, 
Crusoe, we will say, owned every foot of it except 
the highways, together v/ith exclusive piscatory 
rights, including the oysters and clams on the sea- 
shore. Crusoe, on account of his superior mental 
and physical powers, might have made a chattel 
slave of Friday, but there was no necessity for it. 



188 The Problem of the Unemployed 

Crusoe's ownership of all the land gave him all the 
advantage of the slaveholder, with none of the slave- 
holder's responsibilities or qualms of conscience. In 
kindness of heart, therefore, Crusoe arranged to give 
Friday work, and in order that he might be abund- 
antly supplied with this blessing, he fixed his wages 
at the equivalent of a dollar a day for twelve hours 
of it, which was just sufficient to keep Friday in 
good working order, provided he put in six days' 
work in every week. Crusoe then told Friday that 
it was a free country, and that he, Friday, was a free 
man, and as such could work for a dollar a day or 
not, just as it suited him. Since Crusoe owned all 
the land, Friday had the free man's right to starve 
on the highway or work on Crusoe's terms, and so 
he went to work. When labor-saving machinery was 
introduced, which more than quadrupled the wealth 
which Friday produced, who, except Crusoe, by any 
natural law, could get any advantage from it ? Cru- 
soe could still pay the current wage of a dollar a 
day and pocket four times as much wealth produced 
by Friday. Friday, however, would begin after a 
while to feel vaguely that there was something 
wrong in the system which gave Crusoe all this 
increased wealth produced by labor-saving machin- 
ery, while he, Friday, had to work just as hard as 
ever; and, having learned to read and write and do 
a trifling amount of thinking, Friday would get 
sulky and form a labor union and go on a strike. 
This would make it uncomfortable for Crusoe, 
although he could hold out and starve Friday into 
abject submission if he chose to do so. But rather 
than go to this extremity, and provoke the rioting 
and bloodshed which would surely follow, he would 



The Distribution of Wealth 189 

make a compromise of it, and so probably reduce 
Friday's hours of labor a trifle and perhaps raise 
his wages a little. But trouble between the emploj^er 
and the employee would not end with this. Friday 
would always be sulking and demanding more, 
because he would be becoming more intelligent, 
although for a long time the real cause of the failure 
of his wages to advance with the increasing amount 
of wealth produced would not dawn upon him. Fri- 
day's discontent and restlessness, brought about to 
some extent by "agitators," would, from time to 
time, secure small advances in wages and slight re- 
ductions in hours of labor. This would not be accom- 
plished naturally, but arbitrarily, as the result of 
constant warfare and bickering, accompanied by 
immense losses from strikes and lockouts, causing 
bitter feelings between the employer and the em- 
ployee. 

Now, suppose the land on this island had been 
owned by a thousand Robinson Crusoes instead of 
but one, and that there had been ten thousand Fri- 
days instead of but one Friday, and that conditions 
there were the same as in the world today, some of 
the Fridays being out of work all the time and at 
all times ready and anxious to get the places of those 
who had work. Why would not competition alone, 
among those who must have jobs, when there were 
not jobs enough for all, reduce wages and keep wages 
at the point at which the common laborers could 
barely subsist, no matter what might be the increased 
amount of wealth produced with the aid of improve- 
ments in labor saving appliances? V/ould not this 
inevitably be the case, even in the absence of any 
formal combination or agreement on the part of 



190 The Problem of the Unemployed 

employers fixing rates of wages ? And this being so, 
there would then be practically thousands of slaves 
and hundreds of slave-owners, instead of one slave 
and one slave-owner. How could such slave-like 
conditions be ameliorated except by combinations of 
laborers ? Combinations which, of course, many sin- 
cere and liberty-loving people would denounce and 
endeavor to suppress by law. 

Let the thoughtful reader ask himself in what 
respects the situation above described differs from 
that which exists in the industrial world today. As 
already shown, employers are divided into two gen- 
eral classes; the unprivileged employer of the one 
class, being little more than a laborer himself, has 
nothing to gain by the lowering of the scale of 
wages; the privileged employer of the other class, 
however, has everything to gain by it, because his 
interests, as the owner of valuable land, or the recip- 
ient of other special privileges, exceed his interests 
as a laborer and a capitalist. Unprivileged employ- 
ers, however, being unable to see beyond the first 
effects of a reduction of wages, and having no knowl- 
edge of the underlying cause which tends to grind 
themselves down as well as their employees, and in 
fact being powerless to do otherwise, join hands 
with privileged employers in efforts to prevent an 
increase or bring about a decrease in wages. In 
this, they are assisted by the natural tendency of 
wages to fall with increase of population, coupled 
with an artificial scarcity of land. 

We are always hearing of the struggle between 
capital and labor, when in point of fact it is never 
between capital and labor, but always between those 
who are principally interested as the owners of val- 



The Distribution of Wealth 191 

uable land or as the recipients of special privileges on 
the one side, and those who own capital and those 
who perform labor on the other side. The real 
interests of capital and labor are, in the very nature 
of things, harmonious, but always, in point of fact, 
antagonistic to landlordism and monopoly. 

Under present conditions, the tendency of wages 
of employees to fall can only be resisted by trade 
unions, and by public sentiment, which favors the 
paying of a living wage. These powers of resistance 
have so far, to some extent, prevailed as to skilled 
manual labor, which can more easily protect itself 
by combinations, and in many instances hours of 
labor have been lessened and wages of employees 
increased. But the struggle against advancing pop- 
ulation and an artificial scarcity of land must finally 
prove a hopeless one. Labor unions, strikes, boy- 
cotts, riots, and even bloodshed, can accomplish little 
in the end against the irresistible law of rent. From 
the very nature of rent, as heretofore shown and 
illustrated, it follows with mathematical certainty 
that the wages of a large and constantly increasing 
class of laborers must ultimately fall, even in this 
country, to the starvation point, and the tendency 
in this direction, under existing conditions, will be- 
come more and more marked as the price of unused 
land increases. 

What of hope has the future then in store for the 
average working man? There is no hope for him 
under present conditions. Yet we are all the time, 
with accelerating ratio, inventing more and more 
wonderful labor-saving machines ; we are thought to 
be on the very eve of discoveries which will revolu- 
tionize industries and increase the total output of 



192 The Problem of the Unemployed 

the comforts and luxuries of life almost beyond the 
power of the imagination to conceive. But the lot of 
the average working man will not improve. With 
increase of population, it will grow worse and worse 
— even here in America. The present industrial sys- 
tem contains in it no promise of relief in the future 
to its millions of victims ; it holds out to them no hope 
of beneficial participation in the glories of an advanc- 
ing civilization. The ability of the laborer to produce 
wealth may be multiplied ten-fold or a hundred-fold, 
or even a thousand-fold, by further and yet more and 
more wonderful improvements in labor-saving de- 
vices, but this will not change the iron law of wages. 
Armies of unemployed seeking work and unable to 
find work will then as now compete for employment 
against the employed, and continue in the future as 
in the past to drag wages toward the starvation 
point, while millionaires, and billionaires even, in- 
crease and multiply. 



CHAPTER XIV. 

THE ULTIMATE REMEDY. 

AND WHY IT SHOULD BE CONSIDERED BY THE 
POLITICAL ECONOMIST. 

FROM what has so far been shown it is evident 
that the failure of labor-saving machinery to 
bring about a vast change for the better in the con- 
dition of labor is due to the fact that such improve- 
ments increase rent without increasing wages. It 
is also equally clear that one of the reasons, if not 
the reason, why men v/illing to work are so often 
out of work, is because individuals can profitably 
withhold valuable land from use entirely, as well as 
from the use to which it is best adapted. Having 
ascertained the cause, the remedy is obvious. It 
consists in a simple change in the application of the 
taxing power of government. The question to be 
first determined, in this connection, however, is not 
whether the change could be justly made, but 
whether it would have the effect intended. Should 
this be decided in the affirmative, it will then be in 
order to show, if possible, how all who own land 
and who have invested the fruits of honest toil in 
its purchase can be suitably compensated for the loss 
of the privileges which its ownership now confers. 
But whether this be shown or not, the discussion of 
the remedy which must ultimately be adopted will, 
in any event, bring out more clearly the underlying 



194 The Problem of the Unemployed 

cause which accounts for low wages and involuntary 
idleness. 

When industrial conditions shall have been regu- 
lated in harmony with natural laws, everything 
which increases the ability of man to produce wealth 
will necessarily increase the wages of the laborer. 
Mechanical inventions will then lighten the toil of 
the working man and add to his happiness and inde- 
pendence. He will no longer look upon them with 
doubt and trembling, for his wages will keep pace 
with the increase in the wealth-producing power 
which labor-saving processes confer. Nor will he 
dread the competition of his fellow laborers, for no 
obstacle will then prevent the use of the unused nat- 
ural opportunities for employment abounding on 
every hand. Until such conditions prevail, labor will 
never be satisfied, for neither the moral nor the nat- 
ural law can be fulfilled so long as progress in the 
arts and sciences fails to benefit directly all who toil. 

Socialists insist that the only way in which the 
laborer can retain the wealth which he produces is 
through control by the government of all the factors 
of production, including capital and labor as well as 
land. Failing to realize that liberty is the dearest of 
human possessions, the socialist dreams of substi- 
tuting the benevolent tyranny of a bureaucracy for 
the selfish tyranny of individual employers. Failing 
to appreciate the fundamental distinction between 
ownership of land and the ownership of things pro- 
duced by human labor, or between the values cre- 
ated by the individual and those created by the com- 
munity, he confuses capital with privilege and 
assumes that justice will only be reached when indi- 
vidual ownership of both is abolished. 



The Ultimate Remedy 195 

The teachings of the political economists of the 
new school, however, differing from those of the 
socialists, may be summed up as follows: 

First. Every individual can, without injury to 
others, and in harmony with natural law, appro- 
priate to himself all the wealth which he produces, 
be it ten times or a hundred times greater than that 
produced by another. 

Second. The natural law demands equality, not 
in the enjoyment of the rewards of effort, but in the 
opportunities for applying effort, it being the con- 
cern of the State, as Ida M. Tarbell says, to see that 
men have equal opportunities to carry on enter- 
prises rather than to conduct enterprises for them. 

Third. Land — the earth — is in effect a great 
storehouse, filled to overflowing with treasures pro- 
vided by nature for the equal use and enjoyment of 
all mankind, and human laws which permit some 
men to extort tribute from other men for the privi- 
lege of access to these treasures violate natural law ; 
hence the confusion, waste and distress which at 
present characterize industrial conditions. 

Fourth. Obedience to the natural law, with 
respect to the bounties of nature, can be secured by 
requiring all who enjoy the privilege of the exclusive 
possession of any portion of the earth to pay, in the 
form of a tax for the support of government, approx- 
imately what such privilege is worth. 

Political freedom does not in itself prevent indus- 
trial slavery. Whatever the form of government, 
material progress under present conditions only 
increases the dependency of the employee upon the 
employer, while with the spread of intelligence the 
employee becomes more and more discontented with 
the slave-like conditions under which he is compelled 
to toil. To escape the tyranny of the employer, the 
employee submits to the tyranny of the labor union. 



196 The Problem of the Unemployed 

The struggle for freedom, however, will not down. 
From the turmoil and suffering in which the labor 
situation is now involved, peace must finally be 
evolved; that it will be the peace of freedom, and 
not of slavery, is the conviction of all who believe in 
the ultimate triumph of righteousness. 

Let us, therefore, postponing consideration of the 
method of its accomplishment, which perhaps cannot 
be predicted with certainty, imagine conditions 
which would prevail when the inalienable right of 
every man in the use of the gifts of nature, including 
land as well as air and water, is at last recognized 
by law and custom. Land will then in effect be 
nationalized, but individuals will continue to own it. 
The people, while enjoying the benefits of govern- 
ment ownership, will escape the evil connected with 
such ownership. There will then be no such thing as 
taxation. The words "tax" and '"taxation" will 
remain, but taxes and the burden of taxation will in 
reality have been abolished. The rent v/hich indi- 
viduals now appropriate will then be appropriated 
by the government, and collected in the form of a 
direct tax on land alone, according to its value, 
regardless of improvements. Rent, or in other words 
privilege, only will be taxed. The revenues thus 
derived from the rent of land will be sufficient to 
enable the government to dispense with every species 
of taxation now practiced. All who then pay taxes 
will in effect simply pay the government rent for 
the land on which the taxes are levied. While indi- 
viduals will continue to hold the legal title to land, 
the beneficial ownership will be in the people at 
large. The values created by the community will 
then go to the community; now, individuals appro- 



The Ultimate Remedy 197 

priate these values which others create. No change 
in the machinery in use at the present time for 
collecting direct taxes will be necessary. The tax 
will be so adjusted as to take neither more nor less, 
approximately, than the economic rent of land; 
therefore, there will be no proifit in the mere owner- 
ship of land. As land increases in value the tax will 
increase, and the unearned increment will go to the 
government, as it now goes to individuals; hence 
unused land will be free land, and there will then be 
no profit in owning land without devoting it, by 
means of appropriate improvements, to the use to 
which it is best adapted. Land will continue to be 
bought and sold, and it v/ill descend to heirs and 
devisees just as it does at present; but the selling 
price will not exceed, approximately, the value of 
the improvements on it. Private property in things 
produced by human toil will be even better safe- 
guarded than at present, for no man will be permit- 
ted to take a portion of another man's earnings for 
merely assenting to the other's employment.* Equal- 
ity in the use of the bounties of nature will thus be 
attained. For those who enjoy the privilege of the 
exclusive possession of any portion of the earth will 
then pay in the form of a tax what the privilege is 
worth, while those who do not enjoy such privi- 
leges will pay no taxes ; hence the burden of taxation 
will no longer fall upon industry and enterprise. 

An illustration of what might be made universal 
is seen in the section of school land formerly belong- 
ing to the State of Illinois, on which a portion of the 
City of Chicago is now located. The small remnant 

*See Chapter IV, on The Nature of Rent. 



198 The Problem of the Unemployed 

of this land still owned by the State has for many 
years been leased to private parties on terms pro- 
viding for perpetual renewals and with no restric- 
tions against subleasing. The lessee was required to 
pay as rent six per cent of the value of the land, 
exclusive of improvements on it, the land to be 
re-appraised every five years. As the land increased 
in value the rent increased, and the ground rent 
collected by the government in this way amounted 
approximately to the economic rent of the land, 
according to the definition of economic rent hereto- 
fore given. The lease being perpetual, the lessee is 
as secure in the ownership and enjoyment of the 
improvements on the land as he would be if he owned 
the land in fee simple. The government as a land- 
lord took approximately the entire economic rent 
and used it for the support of the public schools. 
The situation was the same, however, as if the State 
in the first instance had deeded the land outright to 
the original lessees, reserving as a condition to its 
continuous enjoyment the payment of an annual tax 
of six per cent on its value as unimproved land. 

The lot occupied by the Chicago Tribune building 
is a part of this school section, and until recently 
was leased in this manner to the Chicago Tribune 
Publishing Company. When last appraised, it was 
valued at $789,600. Six per cent of this amount, or 
$47,000, would have been the annual ground rental 
under such appraisement for the ensuing five years, 
had not the tenure been changed. The building on 
the land is worth a million dollars, and its owners 
would thus have paid the State $47,000 a year for 
the privilege of the exclusive possession of the land 
which the building occupied. It would not have 



The Ultimate Remedy , 199 

occurred to them, however, that they were paying 
any tax in this connection, since they were receiving 
the use of land worth $780,000, which the people of 
the State of Illinois owned. But had the land been 
granted by the State to the Tribune Company, and 
its successors and assigns forever, with a reserva- 
tion to the effect that it should be perpetually sub- 
ject to the payment of a direct tax sufficient to absorb 
the entire economic rent, the same thing would have 
been accomplished. The use of the word *'tax" in- 
stead of the word "rent,'* and the omission of all 
reference to leasing, would have made no difference. 
No one holding land under such a grant would feel 
that he was paying anything more than rent when 
he paid in the form of a tax the equivalent of rent. 
And so it will be when all are permitted to use the 
bounties of nature on equal terms. 

As already shown, when the values produced by 
society at large are thus appropriated for govern- 
mental purposes, land, exclusive of improvements, 
will have no selling value. The value of the ground 
itself will add nothing to the purchase price of real 
estate. Since land will have cost its owner nothing, 
the so-called tax which he will pay for the privilege 
of its exclusive possession will, in fact, be no tax at 
all ; it will simply be rent collected as taxes are now 
collected. It will be a tax in name only. 

Had all of the 640-acre school section been con- 
veyed gratuitously to private owners in the first 
instance, on terms requiring the payment of the 
economic rent to the State in the form of a tax, the 
people of Illinois would now be enjoying an income 
from it of over $20,000,000 a year. The improve- 
ments on this section of land would have not been 



200 The Problem of the Unemployed 

any less extensive or less valuable, nor would the 
city have grown less rapidly. The buildings on the 
remnant of the land held under leases of this char- 
acter are fully up to average of those in the same 
neighborhood on privately owned land. The Chicago 
Savings Bank, recently completed at a cost of 
$650,000, stands on school land thus leased in this 
way to that institution. The State now collects as 
taxes a portion of the economic rent ; why should the 
possession of land be less secure if the State col- 
lected all of it? And if improvements were not 
taxed, why would not men be even more inclined to 
improve land, especially since no capital would then 
be sunk in its purchase? 

Under the present system, if the owner of land 
fails to pay the taxes levied against it, he loses his 
improvements as well as his land ; this would not be 
the case, however, under the system which must 
ultimately prevail. When ground rent only is taxed, 
it will be practicable to provide for fully compen- 
sating the previous owner for all improvements on 
land sold for taxes. And not only so, but an auto- 
matic check will always guard against the levy of 
taxes in excess of economic rent. All of this is clearly 
explained in "Natural Taxation," by the late Thomas 
G. Shearman, in the following paragraphs, which 
are quoted in full : 

"When taxation is levied exclusively upon ground 
rent every man will have, for the first time in human 
history, an absolute and indefeasible title to all of 
his property which is the production of human skill 
and industry, subject only to the right of the State to 
take it, upon making full compensation for its value. 
Such compensation would enable the owner to 



The Ultimate Remedy 20i 

replace the property thus taken with other property 
of the same description and value. This general 
right of the State is practically no limitation upon 
the absolute right to individual property. 

"It is perfectly plain that no one has any such 
right at present, and that no one can have it, under 
any existing system of taxation. For, so long as the 
State assumes the right to tax anything besides 
rent, it is impossible for any man to retain the entire 
fruits of his own industry. Every year the State will 
deduct something from those fruits, under the name 
of taxation; and no one can ever foresee precisely 
how much will be taken in this manner. The fluc- 
tuations, both in the amounts and m.ethods of such 
taxes, are so great and incalculable that no one can 
have any reasonable certainty as to the extent to 
which his earnings will be secure against the 
demands of the State. 

*'But if taxes were once confined strictly to ground 
rent, all this would be changed. Chattels of every 
description would of course be absolutely secure; 
since the only remedy which would be allowed to the 
State for the collection of taxes would be the sale of 
some exclusive privilege on land. But buildings and 
all other improvements on land would be equally 
secure against all taking without compensation. 
This is not at first sight so clear ; and it needs, there- 
fore, fuller explanation. 

"The exclusive tax upon ground rent would lose 
its entire character if the State were allowed, under 
any pretense, to collect it from personal property or 
improvements. It is a fundamental condition of 
such a tax that it be collected only out of rent. It 
must, therefore, when payment is refused, be col- 
lected only by selling the control of the taxed land 
to some person who will not only pay the tax, but 
will also pay the land holder, thus sold out, the full 
value of all of his improvements. If no one will pay 
the tax, subject to those conditions, that is conclu- 
sive proof that the tax is too high, H2id that it is in 



202 The Problem of the Unemployed 

reality based upon an assessment including other 
values than the mere value of the land. The pur- 
chaser in such case would, of course, take the land, 
subject to the annual liability for taxes; but he 
would also acquire the same absolute title to im- 
provements which the previous possessor had; so 
that he, in turn, could not be sold out for taxes with- 
out full compensation for improvements. Thus no 
one would ever pay taxes upon the value of any 
other property than the bare land. 

"Universal experience has demonstrated that 
there would not be the slightest difficulty in carrying 
such a system into practical operation. This system 
has long been in operation, upon a great scale, both 
in public and private affairs. Wherever ferry fran- 
chises belong to a municipality, as in the city of New 
York, such franchises are sold at auction, at inter- 
vals of five or ten years, always subject to two con- 
ditions: first, the payment of rent to the munici- 
pality ; and second, the payment of full compensation 
to the former holder of the franchises, for boats, 
piers, houses, and all other structures and materials 
used in operating the ferry. Street railroad fran- 
chises are sold in the same manner, for terms of 
years, by every honest municipal body having con- 
trol of the subject.* So landlords constantly lease 
their land for terms of years, to men who erect 
expensive buildings thereon; the landlords cove- 
nanting to pay the value of such improvements upon 
the expiration of the lease. There is no more diffi- 
culty in providing for an annual sale of land, if 
necessary, subject to these conditions, than there is 
in providing for a sale in every five, ten or twenty 
years. A ferry franchise is just as much a title to 

*"The conception of a really incorruptible city council will 
seem, to most American readers, too wildly improbable for 
the basis of even a theory. But effete Europe is so far behind 
us in the grand march of civilization, that such Utopian bodies 
are quite common there; and the method of the text is com- 
mon also." 



The Ultimate Remedy 203 

*land/ within the meaning of the law, science and 
common sense, as is any other land title whatever.* 
"Of course, the valuation of improvements would 
be made upon a common sense basis. The land- 
owner, upon making default in taxes, would be enti- 
tled to just as much compensation for his buildings 
as those buildings really added to the market value 
of the land on which they were built, but not more. 
If, as often happens, an expensive building had been 
put up in a district where it could never be of any 
use, nothing should be allowed for it beyond the 
value of its materials, after it had been pulled down. 
But for any really useful building, compensation 
would be allowed, sufficient to enable the owner to 
put up a similar building, in similar condition, upon 
an adjoining tract of land. In short, whatever loss 
the owner of the building incurred, by reason of his 
own mistakes or extravagance, he would be left to 
bear; but whatever value belonged to the building, 
exclusive of the land underneath it, he would invar- 
iably be allowed to retain." 

No difficulty will be experienced in so fixing the 
amount of the tax as to take approximately the 
whole of the economic rent of any tract of land. A 
few illustrations will make this plain : My neighbor 
owns a single lot, which, with the dwelling house 
improvements on it, rents for $400 a year. The 
improvements are appropriate to the location, and 
are worth $3,000. The prevailing rate of interest 
in this community, when the security is ample, is 
5%. Allowing 5% interest on the value of the im- 
provements, and say, $125 a year to cover insurance, 
repairs, renewals and the expense of collecting 
rents from tenants, etc., and the economic rent of 
this lot is, approximately, $125 a year. It is $150+ 

*Benson v. New York, 10 Barbour, 223, 233. 



204 The Problem of the Unemployed 

§125=$275; $400~$275=$125. The tax on it 
therefore would be fixed at about $125. Adjoining 
these premises there are four lots on which there 
are dwelling house improvements also of the value 
of $3,000. These lots and improvements belong to 
another neighbor who can afford the luxury of spa- 
cious grounds, but each lot being equally as valuable 
as the one first mentioned, his taxes would be four 
times as much, or $500 a year. As when a man goes 
to the theatre, if he chooses to appropriate four 
seats instead of one, he must pay accordingly, 
whether he uses all of them or not. 

Again, the building in v/hich I have an office 
brings its owner a total net rental of, say, $13,000 a 
year, after all deductions for insurance, renewals, 
cost of collecting rents, etc., have been made. It can 
be duplicated for $100,000, interest on which is 
$5,000 a year; hence the economic rent of the land 
which it occupies is approximately the difference 
between $13,000 and $5,000, or $8,000, which would 
be about the amount of the tax levied against the 
land if the rent were appropriated by the govern- 
ment. On one of the opposite corners is a building 
worth $40,000, which brings its owner a net rent 
of $10,000 a year. Making the calculation as shown 
above, and it is found that the economic rent of the 
lot on which it stands is also $8,000. But on another 
corner is a tumble-down one story building which 
rents for only $6,000. The lot on which it rests is 
not less valuable than those on the other corners, 
and if appropriately improved it would yield the 
same amount of rent ; hence the tax assessed against 
it would be the same. In other words, the owner of 
the legal title to this last lot would pay the State the 



The Ultimate Remedy 205 

same amount of rent, whether he properly im- 
proved it or not. 

Sales of improved real estate would also furnish 
the tax assessor data from which the economiic rent 
of land could be ascertained. Just as the thermom- 
eter tells whether the temperature is above or below 
normal, so would prices paid for improved landed 
property tell v\^hether the taxes assessed against it 
were too high or too low. Thus, if real estate in any 
locality should sell for decidedly more than the value 
of the improvements — if people were willing to pay 
much more for a tract of land than the improve- 
ments on it were worth — this would be a certain 
indication that the tax levied against it should be 
raised. If, on the contrary, real estate Vvere sold 
for taxes, under the provision heretofore explained, 
which would require the purchaser to fully compen- 
sate the previous owner for the value of the im- 
provements, this would usually indicate that the 
taxes should be lowered. 

It is not claimed that taxes v/ill ever be assessed 
with mathematical accuracy, or that it is desirable 
even for the government to take literally all of the 
theoretical economic rent of land. Those who occupy 
land will directly or indirectly pay the tax, but those 
who own the land will often act as tax gatherers, 
and for this service compensation will be provided 
by the laws of supply and demand. Thus, a man 
having $20,000 contemplates erecting, say, ten 
dwellings costing $2,000 each. To make the invest- 
ment profitable it will be necessary to collect from 
his tenants, in addition to interest, a sufficient 
amount to cover the tax paid on the land occupied, 
as well as the cost of insurance, repairs and renew- 



206 The Problem of the Unemployed 

als. He must, therefore, become in effect a tax col- 
lector for the government, and not only so, but to a 
certain extent a guarantor of the payment of the tax. 
And so when any one puts improvements on land, 
either for a home for himself or for any other pur- 
pose, there is always an element of risk in the invest- 
ment which the renter does not incur. Increase or 
decrease of population in the neighborhood, as well 
as other circumstances, may render improvements 
unsuitable to changed conditions, and impair if not 
destroy the value of them altogether. Men will not 
make investments involving such risks, and often 
requiring them to act as tax collectors, unless paid 
for it. Therefore, it is not likely that the govern- 
ment can ever collect more than 80 or 90 per cent 
of the theoretical economic rent. The remainder of 
it will be retained by land owners to cover the risk 
involved in improving land and the labor involved 
in collecting from those who actually use land what 
the use of it is worth. But competition, which will 
then be free with respect to land, will always so fix 
the amount of the tax as to give land owners no 
more, approximately, than they will be equitably 
entitled to for such service. 

It may be asked, why will not landlords be able to 
retain more than ten or twenty per cent of the eco- 
nomic rent of land which tenants occupy? The 
answer is, that rents are regulated wholly by supply 
and demand, the desire of landlords having little to 
do with the matter. If the demand for houses in 
any locality exceeds the supply, rents (using the 
word in its popular sense) will rise; if the supply 
exceeds the demand, rents will fall. With no tax 
on buildings, and land owners being no longer fined 



The Ultimate Remedy 207 

for putting improvements on land, a demand for 
houses will be more easily supplied than under pres- 
ent conditions; it will, therefore, be impossible, 
except temporarily, to charge more for the use of 
real estate than the economic rent of land added to 
interest on the value of the improvements, together 
with allowances for insurance, repairs, etc. 

The question asked, however, when put in the 
concrete answers itself. Thus, why could not that 
neighbor of mine, by raising the price charged for 
the use of his house and lot to $500 a year, obtain a 
gross income of $375 from the property, instead of 
$275, after payment of the tax of $125? Were he 
thus to increase the charge, and the tenant, finding 
it impossible to do better elsewhere, should submit 
to the advance, this would be conclusive proof that 
the economic rent of the land was more than $125 a 
year. It would show that the tax ought to be $225, 
or thereabouts, instead of $125, and so the tax asses- 
sor would soon raise taxes in the same proportion on 
all lands in that immediate vicinity. Hence the gov- 
ernment, and not the landlords, would ultimately get 
the benefit of any crowding up of rents. 

But this suggests another question : If landlords 
had nothing to gain by it, why would rents advance 
at all? And why would not the people at large be 
deprived of much of the benefit which ought to 
accrue to them from increase in the value of the use 
of land? The answer is, that competition among 
tenants, and the fact that a landlord here and there 
could always secure a temporary advantage by 
advancing rents, would cause rents to increase gen- 
erally as the value of land increased. Landlords 
would simply be compelled to collect all the ground 



208 The Problem of the Unemployed 

rent possible. Whenever, for instance, on account of 
increase in the demand for dwelling house improve- 
ments, tenants in any locality could be forced to pay 
more, some vigilant landlord would require his own 
tenants to do so, for it would always be to his indi- 
vidual interest to increase the gross income of his 
property. His example would soon be followed by 
others, and then by all, and thus a higher level of 
economic rent in that vicinity would be established, 
and taxes would be advanced accordingly. 

Tax assessors, however, would not be compelled to 
rely wholly upon data obtained from rented property 
in ascertaining the economic rent of land. Improved 
real estate then, as now, would be constantly chang- 
ing hands, and the prices paid for it, as already 
shown, would furnish indisputable evidence of true 
economic rental values. 

The economy and absolute impartiality with which 
public revenues could then be collected, as compared 
with the present wasteful and demoralizing methods, 
also present a strong reason for favoring the system 
suggested. 

All who are familiar with the subject must admit 
that if land were in effect nationalized, and the right 
of the people to its beneficial ownership established 
by law, no practical difficulty would stand in the way 
of the State appropriating economic rent with the 
present machinery of taxation. The question, how- 
ever, which always tends to divert attention in this 
connection is, how can land be in effect nationalized ? 
What reasonable hope can the political economist 
have that land owners will ever consent to relin- 
quish the privileges which the mere ownership of 
land confers, or that any method by which the gov- 



The Ultimate Remedy 209 

ernment can condemn the land and buy out the 
landlords will ever meet with popular approval? 
But this is a question which the political economist 
should not be required to answer. For his functions 
do not include those of the statesman. As a philos- 
opher he points out the conflict between the human 
law and the natural law, and shows what change in 
the human law is necessary to make it conform to 
the natural law ; while the statesman, as a politician, 
considers how the change can be accomplished. If 
the political economist has diagnosed the disease 
correctly, and prescribed the proper remedy, some 
time, and in some way, statesmen will finally secure 
the adoption of the remedy. 



CHAPTER XV. 
IMMEDIATE NATIONALIZATION OF LAND. 

WITH COMPENSATION TO LAND OWNERS.* 

POLITICAL economists are asked to tell why it is 
that inventions do not increase wages, and why- 
men want for work in the midst of abundant unused 
natural opportunities for work. Those of the new 
school say it is simply because individuals instead 
of the government appropriate rent. If this answer 
is true, it follows that if the government alone 
appropriated rent and distributed it among the peo- 
ple by relieving every one of the burden of direct 
and indirect taxation, all unused land would be free 
land, involuntary idleness would disappear, and 
labor-saving inventions would naturally increase 
wages. If it can be shown that this would in fact 
be the case, then a simple cause which accounts for 
the economic evils referred to has been discovered, 
and a correct answer to the questions propounded in 



*It is Hot to be inferred from what is contained in this book 
that the writer either favors or disfavors compensation to land 
owners. The subject of compensation, as well as that of 
natural taxation, is discussed for the purpose only of more 
clearly showing the underlying cause of involuntary idleness, 
and the failure of wages to keep pace with improvements in 
labor-saving processes. Nothing else is germane to the purpose 
of this work, as stated on its title page. The details of a plan 
in accordance with which land owners can be compensated is 
suggested tentatively only, as one method of bringing about 
conditions with respect to land tenures which must ultimately 
prevMl. 



Immediate Nationalization of Land 211 

the introductory chapter has been given, whether 
it be practicable to induce people to adopt the rem- 
edy or not. Hence, for the purpose alone of testing 
the truth of the answer, the effect of nationalizing 
land and collecting economic rent by taxation is 
worthy of consideration, no matter how remote the 
prospect of its being put into actual operation. 

In the United States, as everywhere else, land will 
ultimately be in effect nationalized, but it is by no 
means certain that the forebodings of Macaulay 
will not in the meantime have proven well founded. 
For the forces of want, corruption and brutality 
engendered by an acute artificial scarcity of land 
are incompatible with democratic institutions. 

In 1857 Lord Macaulay wrote in the famous letter 
to H. S. Randall, the autobiographer of Jefferson — 
a letter which President Garfield said startled him 
"like an alarm bell at night" — as follows : 

"I have long been convinced that institutions 
purely democratic must sooner or later destroy lib- 
erty or civilization, or both. You may think that 
your country enjoys an exemption from these evils. 
I v/ill frankly own to you that I am of a very differ- 
ent opinion. Your fate I believe to be settled, though 
it is deferred by a physical cause. As long as you 
have a boundless extent of fertile and unoccupied 
land, your laboring population will be far more at 
ease than the laboring population of the old world, 
and while that is the case the Jefferson politics may 
continue to exist without any fatal calamity. But 
the time will come * * * when wages will be 
as low and will fluctuate as much with you as with 
us. You will have your Manchesters and Birming- 
hams, and in these Manchesters and Birminghams 
hundreds of thousands of artisans will assuredly 



212 The Problem of the Unemployed 

some time be out of work. Then your institutions 
will be brought to the test. Distress everywhere 
makes the laborer mutinous and discontented, and 
inclines him to listen to agitators, who tell him that 
it is a monstrous iniquity that one man should have a 
million while another cannot get a full meal. * * * 

"I have seen England pass three or four times 
through such critical seasons as I have described; 
through such seasons the United States will have 
to pass in the course of the next century, if not of 
this. How will you pass through them? I heartily 
wish you a good deliverance. But my reason and 
my wishes are at war, and I cannot help foreboding 
the worst. * * * 

'The day will come when, in the State of New 
York, a multitude of people, none of whom has more 
than half a breakfast and expects to have more than 
one-half a dinner, will choose a legislature. Is it 
possible to doubt what sort of legislature will be 
chosen? On one side is a statesman teaching pa- 
tience, respect for vested rights, strict observance 
of public faith. On the other is a demagogue ranting 
at the tyranny of capitalists and usurists, and ask- 
ing why anybody should be permitted to drink 
champagne and ride in a carriage while thousands 
of honest folks are in want of necessaries. Which 
of these candidates is likely to be preferred by a 
working-man who hears his children cry for more 
bread ? 

"I seriously apprehend that you will, in some such 
season of adversity as I have described, do things 
M^hich will prevent prosperity from returning. There 
will be, I fear, spoliation. The spoliation will in- 
crease the distress. The distress will produce fresh 
spoliation. There is nothing to stop you. Your Con- 
stitution is all sail and no anchor. 

"As I said before, when a society has entered on 
this downward progress, either civilization or liberty 
must perish. Either some Csesar or Napoleon will 



Immediate Nationalization of Land 213 

seize the reins of government with a strong hand, 
or your republic will be as fearfully plundered and 
laid waste by the barbarians in the twentieth cen- 
tury as the Roman Empire was in the fifth, with 
the difference that the Huns and Vandals who rav- 
aged the Roman Empire came from without, and 
that your Huns and Vandals will have been engen- 
dered within your own country by your own insti- 
tutions. 

"Thinking thus, of course, I cannot reckon Jeffer- 
son among the benefactors of mankind." 

Equality with respect to the use of the bounties 
of nature may, however, be established without an 
intervening period of bloodshed and anarchy. For 
the sake of illustration let it be assumed that the 
nationalization of land will be accomplished in the 
United States suddenly, and in a direct and straight- 
forward manner. This assumption is, perhaps, a 
violent one, but it will nevertheless aid in showing 
that the questions mentioned in the first chapter of 
this work have been correctly answered. 

If the Constitution were appropriately amended, 
the Federal Government could issue three per cent 
bonds, interest payable annually in gold, and use 
them in compensating land and franchise owners 
for the loss of the special privilege which the mere 
ownership of the gifts of nature now enables them 
to enjoy. These bonds could be made exchangeable 
at any time for legal tender currency, and the latter 
could be made re-exchangeable for bonds of large 
denomination, such bonds to be exchangeable again 
for currency, and so on, the principal of the bonds 
being payable in gold at any time at the will of the 
government. Tom L. Johnson, when in Congress 



214 The Problem of the Unemployed 

during the panic of 1893, offered a bill providing 
for the issuance of currency exchangeable for bonds 
of this kind. Reflection will satisfy one that there 
could be no undue expansion or contraction of a 
currency thus based on interchangeable gold inter- 
est bearing bonds. For the volume of the currency 
would expand and contract automatically in accord- 
ance with the laws of supply and demand. The 
bonds would doubtless be worth par in gold, but 
whether this would be the case at first or not, such 
bonds at par would surely provide reasonable com- 
pensation for those who are now depriving their 
fellow men of the heritage so clearly intended for 
the equal use and enjoyment of all. 

Taking the census of 1910 as the basis of the 
calculation, both as regards wealth and population, 
and it will be found that the government at that 
time in thus nationalizing land would have incurred 
an indebtedness of about one hundred billion dollars, 
had land and franchise owners been fully and lib- 
erally compensated. This would have meant com- 
pensation to them in full for the loss of all taxing 
privileges connected with the mere ownership of 
land. In this estimate six billion dollars are allowed 
for the land and franchise values alone of railroads 
and all public utility corporations. It would there- 
fore have required a revenue of about $5,800,000,000 
to meet interest charges and all expenses of govern- 
ment, including national, state and municipal, or 
$63 per capita, had the nationalization of land taken 
effect in 1910. A large part of the required reve- 
nue, however, probably a third or more, would from 
the start have been derived from economic rent 



Immediate Nationalization of Land 215 

paid in the form of a tax for the use of land which 
was in effect owned by the government. It would 
have reduced the real per capita taxation to about 
$42 a year. In 1910 the per capita tax in the United 
States was $29, hence it would only have been nec- 
essary to have raised by real taxation $13 more per 
capita than was in fact raised in 1910, or an increase 
from $29- per capita to $42 per capita. And there- 
after, as the revenue from ground rent increased, 
real taxation w^ould decrease. 

Taxation amounting only to $42 a year per capita 
would not be a serious burden if all unused land 
were free land and if economic rent went to the 
government instead of to the individual, as is nov/ 
the case, and if transportation and public utility 
charges were limited to reasonable returns upon 
improvement and equipment valuations only. It 
would in fact be a mere bagatelle in comparison 
with the enormous increase in real land values, in 
wealth and population which would quickly follow. 
A large part of the revenue required, probably a 
third or more, would from the start be derived from 
economic rent paid in the form of a tax for the use of 
land which was in effect owned by the government.* 

New Zealand, probably the richest and most pros- 
perous country in the world in proportion to pop- 
ulation, collects a revenue of $36 per capita, only 
$11 of which comes from her government owned 
railways, leaving about $25 per capita raised by 
real taxation. The American people are now spend- 



*In the year 1910 $2,799,497,765 was spent in the United States 
for the support of government. Taxation in America amount- 
ing to but $42 per capita will be small, indeed, compared v/ith 
the per capita taxation in Europe when the present war is over. 



216 The Problem of the Unemployed 

ing $15 per capita annually for alcoholic liquors. 
They surely could stand additional taxation to the 
extent of $14 per annum per capita in order to 
accomplish the nationalization of land. 

It is true that much of the nearby unused oppor- 
tunities for employment now held for speculation 
and mere investment purposes, whose owners would 
have received immense sums in the process of 
nationalization, would yield no revenue at first. But 
just as people rushed to the wilderness of Oklahoma 
for free land, so would capital and labor rush for 
the valuable vacant lots and lands and unused coal 
beds and mineral deposits to be found at present on 
every hand. Within two or three years, probably, 
all valuable land of this character, most of which 
is now situated in and near cities and towns, and 
in well settled farming communities, would be used 
and occupied. This increasing use of valuable lands 
now unused would rapidly swell the public revenues. 
The income from ground rent taxation would shortly 
equal and then vastly exceed the interest on the 
bonds issued to land owners. Capital could only be 
profitably invested then in wealth-producing enter- 
prises — enterprises which would give employment 
to labor and add to the world's stock of wealth. None 
of it could be invested in the unused bounties of 
nature for the purpose of blackmailing Effort. All 
the obstacles to employment and to the most effect- 
ive use of land, to which attention has been called, 
would be swept away. An era of business pros- 
perity would be inaugurated, nor could it be checked 
and throttled by a panic-breeding increase in the 
price of unused land. Population would multiply, 



Immediate Nationalization of Lana 217 

and wealth would accumulate with unprecedented 
rapidity. While interest on the public debt incurred 
in buying out landlords would remain a fixed charge, 
the revenues of the government would constantly 
increase with the increase in the value of land. Is 
it not reasonable to suppose, under free land condi- 
tions which would then prevail, that in ten or fifteen 
or at most twenty years the indebtedness incurred 
in depriving land and franchise owners of the right 
of extorting tribute money from their fellow men 
would have been paid, and the heritage of the people 
relieved from all encumbrances? 

By free land conditions, as used above, is meant 
conditions under which individuals would hold land 
on payment to the government of the economic rent 
of it and nothing more or less. Unused land would 
then be free land, and no land could be profitably 
withheld from the use to which it was best adapted. 
To attain such conditions, it would be necessary to 
abolish taxation of personal property and improve- 
ments on lands, since such taxes obstruct the free 
use of land — the source of all employment — and are 
in effect fines upon industry and enterprise. While 
all real taxation inevitably has this effect in greater 
or less degree, and the burden of it in the end is 
borne by consumers and users, nevertheless the 
exemptions referred to would minimize the tendency 
of such taxation to obstruct enterprise and discour- 
age the employment of labor. 

The question as to how it would have been possi- 
ble to have obtained a revenue of $5,800,000,000 in 
1910, and especially so if at the same time improve- 
ments on land and personal property were exempted 
from taxation, and the land value tax limited to 



218 The Problem of the Unemployed 

economic rent only, will be briefly considered. The 
required revenue could have been easily raised by a 
budget made up somewhat as follows : 

Ground rent taxation, not in excess of economic 
rent estimated to amount at first to only one- 
third of total revenue $1,950,000,000 

Customs, double the amount collected in 1910... 750,000,000 

Internal revenue on liquor and tobacco 1,000,000,000 

General stamp tax 300,000,000 

Ad valorem tax on railway freight and passenger 
rates, collected by stamps applied to tickets 

and bills of lading to extent of 40 per cent 1,000,000,000 

Inheritance tax 400,000,000 

Increase postal rates 50,000,000 

Licenses, occupation taxes and miscellaneous.... 350,000,000 

Total , $5,800,000,000 

Taxes levied as above could be collected by a single 
set of Federal tax gatherers at less expense and with 
less partiality than is possible under the present 
complicated and cumbrous system. After deducting 
the amount needed for the general government, the 
remainder could be apportioned among the several 
States, according to some equitable method of dis- 
tribution. Each State government could then, after 
making a similar deduction, distribute what was left 
among its counties, cities and towns according to 
population or otherwise. The principle of local self- 
government would not be impaired. Every political 
subdivision would retain the right to spend as it saw 
fit the portion of the public revenue to which it was 
entitled. The ultimate end being the abolition of all 
taxation, it would be consistent and probably expe- 
dient for the general government to collect the rev- 
enue from the ground rent tax, since the people 
collectively create the values which such a tax appro- 
priates. People living in New York, for instance, do 



Immediate Nationalization of Land 219 

little more to produce its land values than people 
living in Iowa, whose products may be exchanged 
in that city for the products of people living in 
Maine. 

In the estimate given above, it is assumed that 
the land value tax on improved lands in and near 
cities and towns, on mines, railroads and public util- 
ities, which ought in no case to exceed the economic 
rent, would yield at first only $1,950,000,000, or one- 
third of the amount necessary to pay interest on the 
bonds issued to land owners. It is assumed in this 
connection that the economic rent of all improved 
lands would fall at least 50 per cent ; also, that land 
whose owners would have received $25,000,000,000, 
or one-fourth of the $100,000,000,000 of bonds 
issued, would yield at first no economic rent to the 
government, most of the unimproved land and much 
of the land in cultivation being embraced in this 
class. So also as to the 243,000 miles of railroads in 
the United States in 1910. The par value of railroad 
stocks and bonds amounted to $17,942,282,515, an 
average of $73,000 per mile. It is assumed that 
one-third of this sum represented the value of land, 
including terminals, rights-of-way and franchise 
holdings, and the other two-thirds improvement 
values. The gross receipts of railroads in 1910 were 
$2,500,000,000 ; the net earnings amounted to $852,^ 
153,280. It is estimated that $6,000,000,000, or 
one-third the par value of the stocks and bonds, 
would have been used in paying railroads for relin- 
quishing land and franchise values and the water 
in stocks and bonds. It follows, however, that the 
elimination of these factors in fixing rates would 
have resulted in reducing rates to the extent of, say, 



2'20 The Problem of the Unemployed 

5 per cent on the $6,000,000,000, or $300,000,000 
annually. Hence a stamp tax of 40 per cent ad 
valorem paid by shippers and passengers on railroad 
charges as thus reduced would have amounted in 
fact to only a 31 per cent, instead of a 40 per cent, 
increase in rates, and v^ould have added over $1,000,- 
000,000 to the revenue of the government. The bur- 
den of the additional $2,000,000,000, or thereabouts, 
of real taxation collected in the manner thus sug- 
gested would have been collected at a minimum of 
expense and borne by all consumers in proportion to 
the amount consumed by each.* 

An impcjrtant factor to be taken into account in 
considering the feasibility of compensating land 
owners in full is the diiierence betv^^een the govern- 
ment rate of 3 per cent interest and the rate of 4 per 
cent to 8 per cent now paid by individuals and cor- 
porations. Thus, the land which furnishes the site 
for the office building mentioned in the preceding 
chapter is v/orth $160,000, the economic rent of it 
being $8,000 per year, or 5 per cent of its value. 
The government, however, would have obtained the 
land owner's taxing privilege pertaining to this lot 
for $160,000, paying for it in 3 per cent gold interest 
bearing bonds, the interest on which would amount 
to only $4,800 annually. Thereafter the full eco- 
nomic rent as determined by the rate of interest 



*At first the income of the government from ground rent 
taxation would be abnormally low, owing to the immense 
amount of near-at-hand unused land which would become at 
once available to capital and labor; but within a very short 
period these lands would all be occupied, and then the ground 
rent fund would rise to normal figures. Hence no harm would 
result if during this period of transition it became necessary 
for the government to issue additional bonds to provide for 
deficits. 



Immediate Nationalization of Land 221 

prevailing among individuals in that locality would 
be paid the government in the form of a tax on this 
tract of land. It might soon amount to $6,000 or 
$8,000 a year ; hence, in many instances the revenues 
from valuable lands v^ould soon from this cause 
alone more than equal the interest on the bonds given 
in exchange for them. This v^ould quickly offset the 
shrinkage in economic rent resulting at first from 
the opening up to capital and labor of all nearby 
valuable unused land. It v^ould perhaps enable the 
government to retire the bonds referred to v^ithout 
perceptible increase of the burden of real taxation. 
Again, the fact of these gold interest bearing 
bonds being exchangeable for currency, (the cur- 
rency being also re-exchangeable for gold interest 
bearing bonds of large denominations) would pro- 
duce an artificial stimulation of business like an 
inflation of the currency, which would also aid in 
tiding over the first few years of increased taxation. 
But this could produce no disastrous inflation of 
values. The price of land and of stocks, bonds and 
securities based on lands and franchises could not 
be advanced, since all increase in these values would 
be appropriated by the government; a rising real 
estate market, therefore, the cause as well as the 
premonitory sign of every panic in the past, would 
be lacking. The stimulus to business could show 
itself only in an enormous demand for labor to be 
applied to the development of valuable near-at-hand 
unused building lots and farming lands, coal beds 
and mineral deposits, the use of which would then 
be secured without encountering the obstacle which 
the purchase price of land at present always inter- 
poses. 



222 The Problem of the Unemployed 

At this point a question of morals again arises. 
Thus, if land belongs by natural right to all, if the 
value which attaches to it is the product of the 
common energy and enterprise of all, what right 
has the government to compel the people to pay for 
what they already own? If compensation is to be 
awarded at all, why should it not be given to those 
who have been deprived of the heritage rather than 
to those who have enjoyed its exclusive use and 
possession? In point of fact, however, the political 
economist, for reasons already given, has nothing to 
do with the question thus suggested. He sees that 
the natural law demands equality with respect to 
the use of the bounties of nature ; that the violation 
of this law produces confusion and waste, and that 
harmony with it can only be effected by requiring 
those who possess land to pay, for the benefit of all, 
what the use of it is worth. In other words, that 
harmony with the natural law can be reached only 
by what is in effect the nationalization of land. 
When it is proposed to compensate land owners, the 
economist must test the matter, not by trying to 
determine the right or wrong of it, but by consid- 
ering how it would affect the demand for labor and 
the distribution of wealth. Applying this test, the 
conclusion is reached that the government could well 
afford to pay the owners of land in full for all the 
privileges which its nationalization would force them 
to relinquish. For it is evident that the payment of 
the fixed amount of indebtedness incurred in doing 
so, bearing the low rate of interest at which the 
government can float its bonds at par, would be far 
less burdensome upon capital and labor than the 
continuance of the present system of constantly in- 



Immediate Nationalization of Land 223 

creasing exactions on the part of land and franchise 
owners. And especially so, if free land conditions 
from the very start could thus be obtained. 

The British Government is now engaged upon a 
huge scale in buying out great estates in Ireland and 
establishing tenants upon small farms of their own. 
The Act of 1902 appropriated $800,000,000 for this 
purpose. The government charges 2% per cent 
interest with 14 per cent added as a sinking fund. 
At this rate the tenant acquires absolute ownership 
of his farm in sixty-eight and one-half years. In 
Hugh Southerland's "Ireland, Yesterday and Today," 
it is stated that out of the 70,000 purchasers under 
acts of Parliament previous to that of 1902, only 
two purchasers failed to meet their payments, and 
that up to the time the book was written, in 1909, 
a total of over 215,000 tenants had purchased their 
holdings. 

The land question, however, is not solved by a 
mere multiplicity of land owners. The natural law 
demands that all who enjoy the legal right to the 
exclusive possession of any tract of land shall pay 
into the common treasury, for the benefit of all, what 
such right of exclusive possession is annually worth. 
Hence government land purchasing acts should not 
require the repayment to the government of money 
paid landlords, but the land so purchased should be 
held subject forever to the payment of a land value 
tax equal to the annual economic rental value of the 
land. In no other way can justice be meted out, and 
the evils flowing from private ownership of the gifts 
of nature be wholly avoided. 

The success of the government in its treatment of 
farm tenantry in Ireland, imperfect and incomplete 



224 The Problem of the Unemployed 

as the method pursued may be, suggests a plan by 
which the nationalization of all land could be grad- 
ually effected. The government could create boards 
of commissioners, as in Ireland, and give them povv^er 
not only to condemn unused and but partially used 
land and fix the price to be paid for it, but also to 
fix its annual economic rental value at the time of 
condemnation, such rent to be paid annually in the 
form of a special tax on the land condemned. The 
actions of these boards could be invoked, under 
proper limitations, by any individual or corporation 
desiring and able to use the land sought to be con- 
demned for any v^ealth-producing and labor-employ- 
ing purpose for which it was adapted, be it for a 
mercantile, manufacturing, agricultural or residence 
purpose. 

In the State of Texas there are over 150,000,000 
acres of arable land, less than 20,000,000 acres being 
in cultivation. More than 50 per cent of the actual 
farmers of the State are tenants. The unused and 
fertile lands of Texas, moderately well located with 
respect to railroads and markets, are held at $20 
an acre and upwards. Under laws of the character 
suggested any one with capital sufficient to enable 
him to improve and cultivate, say, 100 acres, would 
be saved an investment of $2,000 or more in land. 
The economic rent on such a tract of land would 
hardly exceed $30 a year. In place of $160 a year, 
the interest at prevailing rates on the purchase 
money value, the party in whose favor the unused 
land was condemned would only pay $30 a year to 
begin with in the form of a land value tax. 

Imagine what an era of brisk business and uni- 
versal prosperity for all classes would instantly be 



Immediate Nationalization of Land 225 

inaugurated if any unused piece of land in Texas 
could thus be made available for a home or for any 
labor-employing enterprise without the investment 
by the individual making use of it of the enormous 
sum now required to be paid for the bare privilege 
of employing labor on a gift of nature. 

The great increase of wealth resulting from the 
slight progress toward the nationalization of land 
effected in Ireland by the land purchase acts is strik- 
ingly shown by Mr. Southerland from comparing 
present conditions of certain sections of Ireland, 
where the act has been applied to large estates, with 
conditions existing in the same neighborhood seven 
years before its application, thus proving conclu- 
sively that government indebtedness incurred in buy- 
ing out landlords would be easily liquidated by the 
increase of wealth resulting therefrom. 



CHAPTER XVI. 
THE NATIONALIZATION OF LAND, Continued 

SPECULATIONS IN REGARD TO EFFECTS WHICH WOULD 

FLOW FROM IT, INCLUDING ITS EFFECT ON 

LABOR UNIONS, TRUSTS AND 

SOCIALISM. 

WHILE the nationalization of land, brought 
about at once, and without hardship or exces- 
sive loss to any individual, may be but an "iridescent 
dream," further speculation in regard to it and to 
the effects which would flow from it are nevertheless 
interesting and instructive. For in this way the 
maladjustment of the forces of government in the 
particular to which attention has been called can 
be made even more clearly apparent. The fact that 
the subject may be at present without practical 
interest to politicians and statesmen does not render 
it of less importance to the political economist. Nor 
is interest in the matter from his point of view 
diminished because people at present have neither 
the intelligence nor the patriotism which the remedy 
calls for. As a scientist, he considers the subject 
simply for the purpose of ascertaining whether the 
cause of increasing poverty in the midst of increas- 
ing wealth has been discovered, and if so, whether 
the ultimate remedy is to be found in socialism or 
in individualism, in tyranny or in freedom. 



The Nationalization of Land 227 

Let us then try to imagine what would have hap- 
pened had the landlords of the United States been 
compelled, on the terms stated, to relinquish, in 1910, 
in favor of the government, all the taxing privileges 
previously enjoyed by them as mere owners of land. 
The land value tax for the first year on every tract 
of land would of course have equaled the interest on 
the bonds awarded its owner. If, for instance, a 
farmer's tax was sixty dollars, he would have 
received two thousand dollars in bonds, on which 
the interest in gold would have been sixty dollars. 
With this he could pay all his direct taxes, for there 
would then be no tax on personalty or improvements 
on land. The year before, this farmer would have 
paid the tax on his farm and personal property out 
of money which he earned ; the year after the change 
was made, he would pay it with money furnished 
by the government in the form of interest on the 
bonds awarded him ; yet he would be in no way de- 
prived of the use and enjoyment of his farm. This 
would be the case at first as to every land owner. 
All would still have the exclusive use of the land 
owned by them, and all would at first in effect be 
relieved entirely of the burden of taxation in con- 
nection with it. For the money with which to pay 
the taxes assessed against land would, for the first 
year at least, as stated, be furnished by the govern- 
ment. Taxes levied against owners of improved 
real estate, therefore, on the start would be de- 
creased, and the burden of direct taxation as to them 
would at first be lessened. This condition, however, 
as to all highly valuable lands, would only be tem- 
porary, but as to cheap lands it would be more or 
less permanent, and would continue for many years 



228 The Problem of the Unemployed 

following the change. Probably half or more of the 
land-owning farmers of this country would pay no 
direct taxes on the lands used by them, because such 
lands would not, for many years after the new sys- 
tem went into effect, have any real economic value. 

Since improvements existing at the time the 
nationalization of land became effective would stand 
as security for the payment of taxes, it would be to 
the interest of all owning fairly well improved lands 
to pay the tax assessed against them rather than 
permit such lands to be sold for non-payment.* As 
to unimproved lands, hov/ever, the case would be 
different. Unless the owner of an unimproved tract 
intended to utilize it himself without delay, there 
would be no inducement for him to pay taxes on it. 
If, therefore, he could not sell his title for a small 
premium to one who wished to use the land at once, 
he would let it revert to the government. Thus, 
suppose A owned a vacant lot formerly valued at a 
thousand dollars, on which he had received a thou- 
sand dollars in 3 per cent gold interest bearing 
bonds, and that he was unable or unwilling to im- 
prove this property himself. He would have noth- 
ing to gain by paying the $30 which it would cost to 
hold the land in idleness the first year. Suppose he 
paid the tax, however, with the intention of making 
some one, some time, give him a premium of a hun- 
dred or two hundred dollars or more for the land. 
It would be impossible for him to succeed in such 
a scheme unless others with unused tracts of land in 



*The plan proposed by Mr. Shearman, supra, 201-203, under 
which land owners would be saved the loss of improvements in 
case of tax sales, could not be applied until sufiacient time had 
elapsed for a complete readjustment of rental values. 



The Nationalization of Land 229 

the same locality also held on to them for the same 
purpose. If this were done, it would be conclusive 
evidence that the economic rent of the land was 
more than $30 a year ; hence the tax would be raised, 
and it would cost, say, $40 or $50 to hold the land 
in idleness the next year. And so the tax would be 
increased year by year if need be, and the govern- 
ment, and not the individual, v/ould appropriate the 
unearned increment. The knowledge that the gov- 
ernment possessed this power, and that it would be 
its interest and its duty to advance the tax on vacant 
as well as improved lands until all economic rent 
collectible was appropriated by taxation for the ben- 
efit of the people at large, would effectually deter 
any one from acting "the dog in the manger" by 
trying to hold land in idleness for investment or 
speculative purposes. 

It follows, then, that every vacant city lot, all the 
millions of acres in the aggregate of unimproved 
lands within the zones of vacant land surrounding 
cities, towns and villages, to which attention has 
been called, and the hundreds of millions of acres of 
unused farming lands in the midst of well settled 
farming communities, as well as the tens of thou- 
sands of acres of unused coal beds and mineral 
deposits within convenient distances of great cen- 
ters of population, and unused land everywhere, 
would be thrown open to use and settlement on terms 
requiring practically no investment of purchase 
money. The fact that here and there an owner 
might be able to exact a small premium for the mere 
privilege of immediate possession would not affect 
the general rule that capital could no longer be sunk 
in buying land. 



230 The Problem of the Unemployed 

A few illustrations will bring home to the reader 
the momentous effects of the change outlined above. 
Thus, the clerk or mechanic, for instance, who for- 
merly would have been compelled to surrender $1,000 
of capital in buying a conveniently located vacant 
lot, on which to build his home, would now obtain a 
secure title to it with an initial outlay of but the first 
year's tax of $30. The five-acre tract of unimproved 
land in the suburbs of a city, really useful only for 
market garden purposes, which would formerly have 
cost $5,000, the gardener would now get with an 
initial investment of but $150, and this assessment 
might settle to even lower figures v/ithin a year or 
two. So, also, the tenant farmer and the sons of 
small land-owning farmers would obtain conven- 
iently sized farms on similar terms, not in remote 
wildernesses, but on the unused or but partially used 
lands to be found in the very neighborhoods in which 
they were living. They would thus have the advan- 
tages at once of schools, churches, good roads and 
nearby markets, and all the comforts and interests 
in life which highly civilized society affords. As 
already shown, a given amount of effort applied to 
such lands will often produce quadruple the wealth 
which it can bring forth on cheaper lands at greater 
distances from centers of population. 

Again, the manufacturer looking for a site for a 
new factory would no longer be forced to pass by 
an unimproved block in the heart of the manufac- 
turing district of the city, convenient to railroad and 
wharf, to schools and comfortable sanitary dwell- 
ings for employees, and locate his enterprise in a 
distant suburb, remote from such advantages. No 
"dog in the manger," by demanding a more or less 



The Nationalization of Land 231 

exorbitant price, could prevent the employer from 
taking up the unused land most suitable for his pur- 
pose. He would always, therefore, be able to select 
the tract of unused or but partially used land on 
which the greatest amount of wealth could be pro- 
duced with the least expenditure of labor. 

Nor would the employer be compelled to take the 
chances of a land speculator in connection with a 
labor-employing enterprise. If his ground rent tax 
increased, it would be because his land was becom- 
ing more valuable and he could therefore afford to 
pay the additional rate; if the land decreased in 
value, his tax would decrease accordingly ; for, under 
no circumstances, after the system was fairly inaug- 
urated, would a land owner ever be required to pay 
as taxes more than the economic rent of the land 
which he owned. And so it would be as to all farm- 
ers, merchants, miners and homeseekers; nowhere 
would the purchase price of land, the greatest of all 
obstacles to employment, stand in the path of prog- 
ress. 

Nor would, for instance, appeals to philanthropy 
be necessary then to secure the construction of com- 
modious and sanitary tenement houses in the slums 
of great cities. All improvements on land being 
exempt from taxation, and land owners being no 
longer fined by an increase of taxation for improv- 
ing land, and sites for such tenements being obtain- 
able on easy terms, self-interest alone would quickly 
bring about the employment of labor in tearing down 
unsanitary rookeries, and in the construction of 
comfortable dwellings in place of them. As it is 
now, before the capitalist can build a model tene- 
ment house, he must pay some one for a suitable 



232 The Problem of the Vnem^oloyed 

site from 25 to 100 per cent more than its present 
economic value. He is compelled to do this because 
of the anticipated increase in value always to be 
discounted and added to the real value in fixing the 
purchase price of land. This renders the invest- 
ment a more or less doubtful one. In a city like 
New York, the land alone on which to erect a com- 
fortable tenement often costs far more than the 
building itself; hence, error of judgment with re- 
spect to this speculative value may result in disas- 
trous loss instead of sure and moderate gain. "Busi- 
ness," instead of sweeping towards the proposed site 
and doubling and trebling its value, as its owner 
hopes will be the case, may go in another direction. 
At present, such investments at best partake in large 
part of the nature of a lottery. It is sometimes more 
of a land speculating scheme than a wealth-produc- 
ing and labor-employing enterprise. For every dol- 
lar invested in it in the payment of the products of 
labor, several times as much more must often be 
invested in the purchase of privilege. Under the 
conditions which would then prevail, however, not 
only would the land speculator's risk be eliminated, 
but this particular form of investment, as well as all 
others calling for the employment of labor, could 
be made with a much smaller amount of capital than 
is now possible. This of itself would largely facili- 
tate the employment of labor, and increase the de- 
mand for laborers. 

So also as to the settlement of land in cities and 
towns generally. Vacant lots, to be found every- 
where at present in the midst of improved premises, 
would soon disappear. Population, in obedience to 
natural law, would be attracted to the unused sites 



The Nationalization of Land 233 

for homes and business purposes nearest at hand 
rather than to those among wildernesses of vacant 
lots in the suburbs. Nothing would then interfere 
with the natural tendency to use all land for some 
purpose, and to devote each particular parcel of it to 
the purpose for which it was best adapted, be it for 
a business block, a factory, a dwelling house, a farm, 
a sheep walk, or a cattle ranch. Hence unnecessary 
congestion of population in the slums of cities, and 
its unnecessary diffusion in the suburbs and rural 
districts, would be avoided. Highly improved roads, 
sidewalks and sewers, electric light, heat and power 
service, and all public utilities now impossible of 
enjoyment except in a limited degree by a limited 
number, would then be possible of enjoyment in the 
highest degree by the greatest number; and the 
expense would be trifling in comparison with what 
so wide a diffusion of these public utility privileges 
would cost under present conditions. This would be 
brought about by the natural and common sense 
manner of using land which the appropriation of eco- 
nomic rent by taxation would induce. 

The plan pursued in regulating the use of coal 
beds and mineral deposits would be slightly differ- 
ent. In the case of coal, the method for many years 
practiced by the City of New York in disposing of 
its wharf privileges would doubtless be followed. 
Coal beds would be leased for terms not exceeding, 
say, ten years, in lots to suit, to the bidders offering 
the government the greatest royalty per ton of coal 
produced. Forfeiture of the privileges granted 
would be the penalty for failing to mine in any one 
j^ear a stipulated minimum number of tons, the num- 
ber being in proportion to the magnitude of the bed 



234 The Problem of the Unemployed 

leased. On the expiration of a lease, whether from 
forfeiture or lapse of time, so much of the coal bed as 
then remained would be leased for another term to 
the best bidder, the new lessee being required to pay 
his predecessor the actual value of the improvements. 
A miner, therefore, on finding out that his bid was 
too high — ^that he could not continue to pay the roy- 
alty agreed upon and compete with other operators — 
could safely submit to a forfeiture and take the 
chance of leasing the land on better terms, since, 
if any one bid over him, he would still recover the 
value of his improvcmonts. The purpose of the 
government would be, not to obtain the greatest 
possible income from royalties, as in the case of pri- 
vate ownership, but to bring about conditions under 
which consumers would be furnished with coal at 
as near the cost of production as possible. This 
would be accomplished in the manner described, 
since no one would then be able to derive profit from 
holding coal lands in idleness, unused coal beds being 
practically free to whoever chose to operate them. 
It would, therefore, take little capital to become a 
coal mine operator ; hence the number of coal mine 
employers would be increased to the advantage of 
employees as well as consumers. 

Under these conditions, only the coal beds most 
conveniently located and most easily worked would 
be operated at first — beds from which the greatest 
amount of coal could be produced with the least 
amount of effort — but the royalties paid would never- 
theless be small, on account of proximity to vast 
quantities of unused and practically free coal lands. 
It follows, therefore, that prices to consumers would 



The Nationalization of Land 235 

be but little above the cost of production, provided 
railroad rates were alike to all and were limited to 
reasonable profits on improvement and equipment 
values. It may be remarked that a people with suf- 
ficient virtue and intelligence to accomplish the prac- 
tical nationalization of land would not submit to 
unjust discrimination, or extortionate charges on the 
part of public service corporations.* Assuming that 
this would be the case, and it can be easily shown 
that 6% interest on all capital invested in mining, 
transporting and selling coal could be allowed, the 
wages of miners, railroad employees, and all engaged 
in handling it could be doubled, and yet the price of 
anthracite coal in New York City would be reduced 
perhaps one-third. As it is now, on an average the 
consumer pays, say, $5.00 a ton for coal, of which 
labor gets approximately $1.25, capital 75 cents, and 
land and railroad franchises $3.00. Under the free 
land conditions described, the consumer would pay 
$3.50 per ton for coal, of which labor would get 

*No difficulty will be experienced in preventing rebates, and 
in securing uniform and reasonable rates, when it is fully 
realized that railroads and all public utility corporations are 
mere servants of the people, and as such entitled only to the 
chance of making reasonable profits, say, not exceeding six 
or eight per cent on the actual capital invested. The prob- 
lem will be simplified rather than rendered more complex by 
mergers and combinations carried no matter to what extent. 
Effective publicity alone will secure the observance of law on 
the part of such corporations, and render it easy to obtain all 
reasonable reductions in rates, either by the aid of commis- 
sions or otherwise. But the publicity must be effective, and 
it cannot be made so unless the books of public utility com- 
panies are kept under the supervision of government experts 
and in accordance with uniform methods prescribed by them. 
It is now a penitentiary offense to make a false entry in the 
books of a national bank. Why should the penalty be less 
in the case of a franchise-enjoying corporation? 



236 The Problem of the Unemployed 

approximately $2.50, capital 75 cents, and land 25 
cents.* 

Let the reader consider for a moment what a 
reduction of 33 1-3% in the price of coal, resulting 
not from lower wages, but from the abolition of mon- 
opoly, would signify. It would bring needed warmth 
and comfort to hundreds of thousands of dreary 
homes. It would stimulate manufacturing enter- 
prises, and reduce the cost of producing and trans- 
porting every article which contributes to the com- 
fort and happiness of mankind. An enormous 
increase in the demand for coal would produce an 
enormous increase in the demand for labor employed 
in mining it, and from this would follow an increase 
in the wages of the miner. 

And so in all departments of industry everywhere, 
in like manner and from like causes, the exactions of 
monopoly would melt away and the rewards of 
effort would increase proportionately. 

What, then, would the man of means do with his 
wealth as it accumulates ? He could no longer invest 
it in land, and, snapping his fingers in the face of 
labor, buy with it the privilege of taxing his fellow 
men. All such avenues for increasing one's wealth 
would be closed. As a general rule, no income could 
be realized from wealth unless it was so invested as 
to give employment to labor, while the obstacles to 
such investment which the price of land now inter- 
poses would have vanished. Everywhere on the 
borders of compactly settled communities, where 



*The figures used above are intended merely as illustrative 
of how free land conditions with respect to coal would reduce 
the price and change the ratio of the division of the product 
between the factors of land, capital and labor. 



The Nationalization of Land 237 

all the advantages of a highly developed civiliza- 
tion could be enjoyed, would be found land prac- 
tically free and open to all who cared to use it for 
wealth-producing purposes. 

Is it not evident that the position of capital and 
labor would then be reversed? Capitalists would 
then beg for employers to use idle capital, and em- 
ployers would beg for employees even as employees 
beg now for employment. This being so, labor 
unions, Vv^alking delegates, strikes and boycotts would 
be unheard of. 

If economic rent were appropriated by taxation, 
there would be no occasion for trade unions, and 
working men would no longer be required in self- 
defense to submit to the tyranny of labor organiza- 
tions. No grinding down of wages could then result 
from individual freedom of contract between em- 
ployer and employee. If one laborer worked fifteen 
hours in a day instead of eight hours, and if another 
did twice as much work in a given time as the aver- 
age of his class, none would object. For additional 
wages would then inevitably be the reward of addi- 
tional effort; therefore, the pace set by the extra 
efficient workmen could not result in the reduction 
of the wages of the less efficient ones. At present, 
however, extra efficiency on the part of a few tends 
to reduce the wages of all; hence the necessity of 
trade union regulations compelling all to conform to 
a dull average of mediocrity. This not only destroys 
individuality and lessens the interest of the working 
man in his task, but it also largely decreases the 
amount of wealth which would otherwise be pro- 
duced; yet, but for such regulations, wages under 



238 The Problem of the Unemployed 

present unnatural conditions would inevitably sink 
to the very starvation point.* 

The truth of what is stated in the preceding para- 
graph, that labor unions would then be unnecessary, 
can also be proven by the law of rent and its corol- 
lary, the law of wages. The reasoning, though some- 
what technical and calling for the close attention of 
the student, is unanswerable. Briefly recapitulated, 
it is as follows : Wages never naturally rise above, 
but always tend to fall to the level fixed by what 
labor can earn on free land, since all which a given 
amount of effort can produce on any land in excess 

*The effect on wages generally at present of some workmen 
trying to excel other workmen in the same line of employment 
is shown by the following extract from "The Story of a Rus- 
sian Workman," published in The Outlook: 

"Some years ago, my boss said to me, 'For every bolt you 
make we pay three copecks. Now, you are a fast man. Why 
don't you make more money? You can make more than all 
the other men.' So I worked faster. In a few weeks I was 
making one hundred and fifty bolts a day — four and a half 
($2.25) rubles a day. Then the gentlemen who directed the 
factory said, 'Oh, this is too much for so simple a fellow.' So 
they decided to pay a lower price for each bolt. They did. 
But the baby had come, and I worked still faster. The other 
men had to keep as close behind me as they could, and so they 
all worked faster. Then again I got up to $2.25 a day. Again 
they said, 'Oh, this is too much for so simple a fellow.' They 
decided to lower the price again on each bolt. * * * In a few 
years this clever boss, who gets a commission, he has made 
us work faster and faster, while our wages stayed the same. 
Only a few of us are making more money — a little more, per- 
haps fifteen per cent. But even for us it is bad to have so 
many others working cheaper. Some of them may any day do 
our work for still lower wages. Now, what are you going to do 
about this? Is it right to keep always working faster? I want 
no more of the old slow factories; they are all over Russia and 
are very bad for this country. But lo^k here — when I keep 
working faster, I want to get paid more and more. And how 
can this be if the employers keep lowering the price for each 
bolt I make? And who wants to stop them from lowering the 
price? Only the workmen. If we don't stop them, no one else 
will. So we must have more and more labor unions." 



The Nationalization of Land 239 

of what it can produce on the least productive land 
in use, or on free land, goes in the long run to land 
owners, either in the form of rent or of increase in 
the value of land.* Free land, or the least product- 
ive land in use, is now so remote from centers of 
population, or so lacking in fertility, that wages 
made upon it are little more than sufficient for the 
laborer's maintenance, hence wages in general natur- 
ally tend to fall.f This natural tendency can be 
resisted at present only by artificial methods. It 
therefore follows that trade union combinations are 
necessary under existing conditions, and that, but 
for them, wages would ultimately decline to the very 
starvation point. Under free land conditions, how- 
ever, it would be different. Now, the agricultural 
laborer on free land, which can only be found remote 
from markets, and where he is denied the co-oper- 
ative advantages of a highly developed civilization, 
can ea}Jn, say, but a dollar a day; then free land 
being always close at hand and adjoining thickly set- 
tled communities, he could earn upon it, say two or 
three dollars a day, since, on unused land of this 
character much more wealth can be produced with 
the same amount of effort. This increase in the 
wages of the agricultural laborer would cause a 
proportionate increase in the wages of all labor- 
ers, and such increase would come naturally, with- 
out the aid of trade union combinations, and not- 



*The law of wages, as already stated, is to the effect that the 
higher wages are on free land, or on the least productive land 
in use, the higher wages will be on all lands; the converse 
of this is also of course implied. 

fThis is the cause of the so-called iron war of wages 
announced by Ricardo. 



240 The Problem of the Unemployed 

withstanding perfect individual freedom of contract 
between employer and employee. For it is evident 
if comparatively unskilled labor could always make 
two or three dollars a day on free land, laborers of 
the same grade in other lines of employment would 
never work for less on any land; and if the wages 
of this class of labor were thus by natural methods 
doubled and trebled, the wages of all classes of labor 
would be increased in something like the same pro- 
portion without artificial aids of any character. 

Again, since under prevailing conditions improve- 
ments in labor-saving processes do not naturally 
increase wages, the working man can reap no benefit 
from the increased amount of wealth which they 
enable him to produce, without resort to the arti- 
ficial aid of trade union combinations. This is so 
at present, because such inventions naturally in- 
crease rent and the value of land without increas- 
ing wages or rates of interest. In other words, in 
the division of the product among land, capital and 
labor, the additional wealth produced by such im- 
provements goes to land owners in the form of 
increase in rent and increase in the value of land, 
and not to laborers and capitalists in the form of 
increase in wages or increase in rates of interest. 
With free land conditions, however, none of this 
increase would go to land owners as such ; hence all 
of it would go to capitalists and laborers, and since, 
as already shown, rates of interest would not ad- 
vance, all of the increase in the product resulting 
from improvements in labor-saving processes would 
^0 to labor in the form of increased wages, includ- 
ing the wages of both employer and employee. But 
the employee, owing to the small amount of capital 



The NatioTialization of Land 241 

which would then be required to enable any one to 
profitably employ himself upon nearby free land, 
would be so independent of the employer that he 
could command and receive as wages approximately 
all the wealth which he produced. The wages of 
employees as well as those of employers would there- 
fore naturally increase with every invention which 
increased their wealth-producing powers ; and thus, 
with the removal of the cause which rendered them 
necessary, trade union combinations would disap- 
pear. 

Not only would the cause which produces the labor 
union be removed, but, to a great extent at least, 
the causes which bring about trusts and combina- 
tions in restraint of trade. For no one would then 
contend that a tariff was needed for the protection 
of the American working man. It would then be 
clearly seen that the sole cause of the high wages 
which he enjoyed was the abundance of practically 
free land to be found everywhere close at hand. 
Wages in the early part of the nineteenth century, 
for instance, before a protective tariff was inaugu- 
rated, were higher in America than in any of the 
countries of Europe, the advantage in favor of the 
American working man being even greater compara- 
tively than at present. This was so because land 
was cheaper here than in Europe ; or, in other words, 
because the rewards of effort on the least productive 
lands in use were greater here than there. And for 
this reason wages have always been higher in the 
United States than in England. 

Without a protective tariff — so well described by 
Mr. Havemeyer as the "mother of trusts" — with no 
discrimination in railway charges, with railway 



242 The Problem of the JJnempUyed 

rates based largely if not solely on the improvement 
and equipment valuations of railroads, v^ith free land 
conditions in respect to coal beds and mineral de- 
posits, the very life v^ould be taken from nearly every 
trust which now defies the law of competition and 
prevents the exercise of individual initiative. 

Again, with increase of wages to employees as 
well as to employers, would come a general increase 
of intelligence, and voluntary co-operative associa- 
tions would doubtless assume proportions undreamed 
of at present. Consumers of all classes would thus 
be guarded against the rapacity of merchants and 
middlemen, as is already largely the case in England. 

Nor is it clear (theories of doctrinaires notwith- 
standing) that any line would then be drawn, put- 
ting an arbitrary limit to the functions of govern- 
ment at the franchise or anywhere else. Man ever 
strives to bring about the greatest results with the 
least amount of work, and it is difficult to see how the 
natural law could be violated by allowing the gov- 
ernment to do anything which experience shows it 
can do with less expenditure of human labor than 
would be the case if it were done by private citizens. 
The only questions to be then considered in deciding 
whether any certain enterprise ought to be under- 
taken by the government or not, would perhaps be, 
which will perform the service cheaper, the govern- 
ment or the individual? With unlimited opportuni- 
ties for profitable private employment produced by 
free land conditions, it is possible that little attention 
would then be paid to the plea that it is unfair for 
the government to compete with private interests in 
any field of enterprise in which it can serve the 



The Nationalization of Land 243 

people cheaper and better than they are being served 
by individuals and corporations. 

The City of Boston sells coal to its school board 
and eleemosynary institutions ; if so, what real objec- 
tion can there be to its selling coal to private indi- 
viduals, should experience prove that coal can thus 
be distributed among consumers generally in that 
city at a saving of cost and labor? What better or 
simpler method could be devised for rendering inef- 
fective an agreement among coal dealers to charge 
unreasonable prices? 

Some years ago, the steamship companies engaged 
in carrying the twelve million dollars' worth of 
refrigerated meats annually exported at that time 
from New Zealand to England, formed a pool and 
raised freight rates. They were notified by the 
Prime Minister of New Zealand that unless the old 
rates were restored, the government would put on 
its own line of steamers. This threat was effective, 
and rates were at once reduced to the former level. 

The manufacturers of twine used in harvesting 
small grains formed a tariff protected trust, and 
doubled the price of this article. Minnesota and 
Iowa then began the manufacture of binding twine 
with convict labor, and the price of it soon fell 50% 
in those States. 

Who shall say that methods of the character noted 
above would not prove to be the best which could be 
adopted for the protection of the people against the 
exactions of such trusts, if any, as might survive 
the abolition of every form of legalized special privi- 
lege? The experience of New Zealand shows that 
methods of this kind would be effective at least. The 
government there not only operates all public utili- 



244 The Problem of the Unemployed 

ties, but it also competes with individuals in the busi- 
ness of banking, of loaning money on real estate, of 
insuring lives and property, of mining coal, and 
even to some extent of carrying on ordinary manu- 
facturing establishments. There are no trusts, as 
we use the term, in that country, nor is it probable 
that they could thrive and prosper under conditions 
existing there. 

Whenever, in the manufacture or distribution of 
products, in the insuring of lives or property, or in 
the performance of any character of service, unrea- 
sonable charges are extorted by means of oppressive 
combinations, the real remedy for the evil may be 
found in the readiness of the government, either 
national, state or municipal, as the case may require, 
to become an active competitor in the business thus 
monopolized. The fear of arousing competition from 
such a source v/ould doubtless in most instances be 
sufficient in itself, as in New Zealand, to prevent 
the formation of any combination in restraint of 
trade. 

We may smile at the idea, but should the State 
of Kansas, by means of a great oil refinery which 
it was once proposed to build, be able to demonstrate 
that illuminating oil can be produced and sold by 
State governments at prices greatly below those now 
charged by the Standard Oil monopoly, would it not 
be foolish to allow the mere spectre of State socialism 
to deter us from extending the experiment into 
other fields and into other lines of enterprise ? What 
is there in the dream of the most ultra socialist to 
terrorize one who believes in the fullest measure of 
individual liberty? Is it likely, when special privi- 



The Nationalization of Land 245 

leges and the private appropriation of rent shall have 
become things of the past, and all shall have tasted 
the fruits of industrial freedom, that the people will 
then consent to be shackled by a socialistic bureau- 
cracy ? 

Suppose the vision of Bellamy about the carrying 
on by the government of immense factories, shops, 
stores, and hostelries, banking and insurance enter- 
prises, were realized, and most of the waste of 
energy now resulting from competition were thus 
avoided ; this would only signify that experience had 
shown that in many instances and under certain cir- 
cumstances the government could obtain the same or 
better results with less expenditure of human effort 
than the individual, but it would not prove that it 
could do so in all cases and under all circumstances. 
With a telephone and an electric motor on every 
farm and in every home, and a trolley line or its 
equivalent at almost every door, numberless articles 
of comfort and luxury could doubtless then be made 
to greater advantage in small shops, and at the very 
homes of the workmen, than in great factories ; and 
especially so v/hen the craftsman's individuality of 
design or finish was desired. Again, it is impossible 
to conceive of any saving of labor by the govern- 
ment's engaging, for instance, in the cultivation of 
the soil. In this, the most important of all pursuits, 
as well as in all others in which energy is not largely 
dissipated by competition, labor would be wasted 
rather than saved were the State to attempt the role 
of employer. 

It therefore follows, since man always seeks to 
accomplish as much as possible with as little work as 



246 The Problem of the Unemployed 

possible, that no matter how rapid the drift in this 
direction may seem, the socialistic commonwealth 
can never be attained, nor need the fear of it lead 
the individualist to dread any extension of the func- 
tions of government which imply either a saving of 
labor or relief from monopoly. 



CHAPTER XVII. 

NATURAL TAXATION. 

THE nationalization of land can be brought about 
gradually by dropping one after the other taxes 
levied on industry and the products of industry, and 
concentrating all taxation on the rental value of land. 
In other words, it can be accomplished by a single 
tax on land values. Since this method of taxation 
is in harmony with the natural law, and violates none 
of its canons, it is rightly called Natural Taxation. 

It is obvious that no tax should be levied which 
cannot be collected economically and without invid- 
ious distinctions between individuals ; neither should 
a tax directly discourage the production of wealth, 
nor should it be so adjusted as to bear with unneces- 
sary weight upon the very poor. These are self- 
evident truths, and any scheme of taxation which 
fails to harmonize with them is unsound, and must 
ultimately be discarded. 

It is sometimes thoughtlessly remarked that since 
a certain amount of money must be raised for the 
support of government, the manner of obtaining it 
is of small importance. As well might it be said that 
since a horse must haul a certain amount of freight, 
it is immaterial whether the cart be fastened to his 
tail or to his shoulders. An improper adjustment 
of the burden of taxation will not only lessen the 
amount of wealth which would otherwise be pro- 
duced, but it may result in the total destruction of 



248 The Problem of the Unem^oloyed 

the wealth attempted to be taxed. Thus, the Egyp- 
tian government once increased the tax on date 
trees to such an extent that owners cut them down 
in self-defense, and thousands of acres of date 
groves, some of which had been producing wealth 
for centuries, were destroyed, being literally taxed 
to death. 

Nothing is more conducive to health, contentment 
and energy than plenty of v/indows for light and 
ventilation in the homes in which human beings must 
rest and eat and sleep, yet in some of the countries 
of Europe, even to this day, windows are taxed; 
hence in such countries as few windows as possible 
are placed in houses occupied by working men ; and 
huts in which tens of thousands of peasants are 
living have no windows at all. It is evident that 
such a tax reduces the wealth-producing power of 
those by whom it must be directly or indirectly paid. 

Again, farmers for instance cannot produce wealth 
with which to pay taxes v/ithout teams, cattle, agri- 
cultural implements and household furniture. Yet 
in hundreds of thousands of instances the Russian 
tax gatherer on his annual rounds ruthlessly strips 
the peasant of these tools of his trade, and in this 
way whole communities are often pauperized. The 
goose which lays the golden e^g is thus destroyed 
by taxation. 

Everywhere, even in this country, people are 
crowded into ugly, inconvenient and unsanitary 
buildings. Everywhere the man who, risking loss 
of capital in doing so, erects upon his land a dwell- 
ing, a barn, a storehouse, or a factory, or opens up a 
farm, or makes any other kind of improvement, is a 
public benefactor. Yet we punish him for thus em- 



Natural Taxation 249 

ploying labor on land previously unused, by increas- 
ing his taxes. We fine him for making his land 
useful to mankind. Before he improves the land, he 
pays the government in the form of a tax a certain 
sum of money for its exclusive possession; as soon 
as he ceases to be a dog in the manger and does 
something with it of benefit to the public, something 
which gives additional value to all the land in the 
neighborhood, we reward him for his enterprise by 
doubling his taxes. 

A hard working farmer moves into a sparsely 
settled region, buys 100 acres of vacant land from 
some speculator, owning perhaps thousands of acres 
oi adjoining unused land, and opens up a farm. The 
new comer receives a hearty welcome from those 
who have settled there in advance of him. All of 
them are eagerly looking forward to the time when, 
with increase of population, will come better roads, 
schools, transportation facilities and the thousand 
and one economic and social advantages of a com- 
pactly built community, but the speculator's consent 
must first be obtained. Consent having been se- 
cured, at the cost perhaps of half or more of the 
settler's meager capital, the government then steps 
in and, by taxing his improvements, compels him to 
pay often three or four times as much every year 
for using the land as the speculator pays for holding 
his land in idleness. 

Ask the owner of any vacant lot surrounded by 
handsome buildings in a city, why he allows such 
valuable land to remain idle, and his reply will 
probably be that in his judgment non-use of it pays 
better than use. As it is now he can afford to let it 
lie idle, since the energy of those who improve ad- 



250 The Problem of the Unemployed 

joining lands will, year by year, add to its value 
without risk or exertion on his part. Would this so 
often be the case if improvements were untaxed and 
the deficit made up by an increase in the land value 
tax? 

It can thus be shown by numberless illustrations 
that a tax on improvements on land discourages 
industry and enterprise, and encourages idleness 
and stagnation. And this is also true as to taxes 
levied upon chattels coming within the definition of 
personal property. If it were not so, why do enlight- 
ened communities sometimes, for instance, exempt 
from taxation fine stock used for breeding purposes ? 
Such an exemption is merely a remission of the fine 
which would otherwise be imposed on the owner for 
importing the stock. The fine is remitted on the 
theory that the community is benefited by having 
the stock brought in. But would not the community 
be benefited also by an increase in the stocks of goods 
of its merchants, by an increase in the capital of its 
banks, by an increase in the labor-saving machinery 
used by its farmers, by an increase in the number 
of looms and spindles in the factories? Why not 
then remit the fine imposed by taxation upon these 
things also, and in fact upon everything produced 
by labor which is useful in the production of wealth ? 

A tax on improvements, or on personal property, 
not only violates the canons of natural taxation, by 
discouraging the production of wealth, and by plac- 
ing unnecessary burdens upon enterprise, but it does 
so also because it is a tax which cannot be collected 
impartially or with any degree of fairness between 
individuals. This is especially true as regards all 
attempts to tax credits, whether evidenced by bonds 



Natural Taxation 251 

or promissory notes or otherwise.* On this point, 
Mr. Shearman, in Natural Taxation, wrote as fol- 
lows: 

"If anything in human experience as applied to 
methods of taxation is settled, it certainly is the fact 
that taxation upon personal property never can be 
made a success. Taxes can be raised from personal 
property, no doubt ; for large sums of money are thus 
raised ; but that they cannot be levied with any reas- 
onable approach to accuracy or equality is demon- 
strated, not only by conclusive reasoning, but by the 
more conclusive fact that they have never been thus 

*"It makes liars and perjurers of all wlio are subject to its 
operations, as shown in the following illustrations: Some 
years ago a returned missionary took up his abode in a town 
of about 10,000 inhabitants in Ohio. His entire fortune, 
amounting to the munificent sum of $3,000, was loaned at 5% 
interest. When the time for preparing the assessment rolls 
came around, he was furnished by the tax assessor with the 
usual blanks to be filled out and sworn to, in which he was 
required to list and appraise, among other things, his house- 
hold furniture and library, and also all money loaned on mort- 
gage or otherwise. He was an honest and truthful man. His 
furniture and library had cost about $1,800, which he, with 
some qua,lms of conscience, however, appraised at $500, on the 
theory that while it was really worth more, it would not bring 
more at forced sale. He also made aflidavit to the simple fact 
that he had $3,000 loaned on mortgage security, and that this 
credit was worth $3,000. How could he, with the fear of God 
in his heart, do otherwise? Now while there were in this town 
one or two millionaires, and numbers of people worth more 
than a hundred thousand dollars each, and scores of residences 
In which the books and furniture were worth from five to ten 
thousand dollars, yet the assessment rolls that year showed 
that this poor missionary was living in the most expensively 
furnished house in the place, and that he was one of the largest 
lenders of money which it afforded. The tax rate was 2i/^%, 
hence the missionary was able to net 2^^% interest on his loan. 
He had the poor satisfaction of knowing, however, that of all 
the people in that town who had filled out and sworn to an 
assessment blank, he was the only one who had not delib- 
erately committed perjury. It is safe to say that instances 
like this can be duplicated in every community in the United 
States where a single honest rendition of personal property 
for taxes can be found, even if this story is not literally true 
in all respects. 



252 The Problem of the Unemployed 

levied. It is not for want of earnest and long sus- 
tained effort that the failure of this system of taxa- 
tion has come to pass. For centuries the effort has 
been made; and for at least six centuries it was 
backed by all the power of a government which com- 
manded the whole civilized world, and which armed 
its tax-gatherers, not with the paltry weapons of 
oaths and penalties, but with the more substantial 
powers of indiscriminate search, the lash, the rack, 
the thumbscrew, the gridiron, and the cross. The 
Roman empire fell to pieces under the pressure of 
this vain effort to reach personal property by taxa- 
tion. * * * 

"Gibbon mentions, quite as a matter of course, 
that fathers murdered their children on a large scale, 
principally as a result of fear of tax-gatherers ; that 
racks and scourges were freely used; that the ap- 
proach of the tax-gatherer *was announced by the 
tears and terrors of the citizens'; and that false 
returns were punished with horrid deaths, as being 
both 'treason and sacrilege' (History, chapters xiv 
and xvii). 

"That which all the tremendous power of Rome in 
its grandest days failed to accomplish, that which 
the infernal tortures of Spain could not accomplish, 
when it beheaded hundreds, burned thousands, and 
massacred tens of thousands, letting loose a brutal 
soldiery in a vain struggle to tax the Netherlands, 
American farmers are still apparently convincc^d 
that they can accomplish by distributing blank 
forms, administering long oaths, and threatening 
penalties of fifty per cent. How far they have suc- 
ceeded, governors, assessors and tax commissions in 
New York, Ohio, Maryland, West Virginia and many 
other States have set forth again and again, lament- 
ing the utter failure of the system. Their complaints 
have become monotonous in their uniformity. * * * 

"The result of the widespread maintenance of 
these taxes is to fill the land with liars and perjurers. 
In some States the business of perjury is mostly 



Natural Taxation 253 

confined to the assessors; who regularly make re- 
turns which they know to be false, but cannot make 
true. In others, such as Ohio, Vermont, Connect- 
icut, all the Southern States and most of the West- 
ern States, perjury is the business of the tax-payers. 
Their scrupulous consciences in many cases find a 
way of escape by omitting, in fact, to take the oath 
which they sign; and they are innocent of every- 
thing except lying. The delicately conscientious get 
some one to sign for them; and where an oath is 
absolutely required, a considerate notary certifies to 
the oath before it is taken; after which, of course, 
it is not taken at all. On surveying the whole field, 
however, one's faith in American truthfulness is 
cheered, and we entertain large hope for the future 
of humanity. For it appears that where blanks are 
diligently circulated and oaths insisted upon, the 
average man will return ten, if not fifteen per cent, 
of his personal property; whereas, in the absence 
of this appeal to piety, he will return nothing at all. 
* * * In one town (in New York) the proceeds 
of a single auction sale of cattle, belonging to one 
resident, amounted to $360,000; while the whole 
assessment of personal property in that town was 
$28,850; 'a sum very much less than that obtained 
for one cow.' 

"The assessors say: *A large percentage of all 
the personal property assessed is found entered on 
the rolls to women, minor heirs, lunatics, who can- 
not watch with the eagle eye of business men, or to 
trustees or guardians.' In some towns these classes 
held more than one-half of all the personal property 
on the assessment roll. Two women, residing in the 
village of Batavia, were assessed for more personal 
property than all the individuals in the neighboring 
city of Rochester, with a population of 70,000. In 
one town a girl, mentioned in the assessment as a 
lunatic, was assessed $5,000 for personal property, 
which the assessor stated was the full amount of her 
personal estate. All over the State 'the amount of 



254 The Problem of the Unemployed 

the assessment depends more on the will, craft, con- 
science (or want of conscience) of the party assessed 
than upon the law or its enforcement.' 

"The state of affairs has grown worse with each 
succeeding year. In 1892 a ridiculous law was 
passed, much lauded by the governor, requiring 
applicants for reduction of assessment to make oath 
that they had not incurred debts in the purchase of 
non-taxable property, or for the purpose of avoid- 
ing taxation. It ought to have been entitled: *An 
act to punish truthfulness and to reward perjury.' 

"Experienced assessors in every State say that the 
most honest returns of property are always made by 
the poorer classes, and the most inadequate returns 
by millionaires; while widows who have no experi- 
ence in business, and trustees who represent widows 
and orphans, are taxed upon every dollar that they 
own. 

"The experience of California furnishes perhaps 
the latest example of the utter failure of all schemes 
for taxing personal property to work out anything 
like an approximation to justice. 

"In 1879 a new constitution was adopted. * * * 
Under this constitution and these laws, not only 
were bonds, money and credits made taxable, with- 
out any deduction on account of debts, except from 
credits, and then only such debts as are due to resi- 
dents of the State of California ; but holders of stock 
in corporations were avowedly and intentionally 
subjected to double taxation; first, upon the cor- 
porate property, and again upon the capital stock, 
which is merely their evidence of title to that prop- 
erty. It was supposed, alike by the friends and 
enemies of the new constitution, that under its oper- 
ation personal property of every description would 
be thoroughly reached, and at any rate, that what- 
ever was by chance overlooked would be more than 
made up by double taxation upon that which was 
found. The actual result has been to falsify all the 
predictions of both the friends and enemies of the 



Natural Taxation 255 

constitution ; for it has done almost none of the good 
or evil which was anticipated; for the reason that 
the capacity of the patriotic taxpayer to commit per- 
jury has been altogether underestimated. Some of 
the results are positively ludicrous. 

"If the assessment returns are to be believed, in 
nine-tenths of California there is not a pound of 
butter; in four-fifths of the State the sheep do not 
produce any wool; fifty counties have quantities of 
beehives, but only four have any honey; personal 
property is vanishing from San Francisco ; loans of 
money are becoming unknown in the rest of the 
State; municipal bonds of all kinds are not held 
within the State to an amount equal to one-tenth of 
those outstanding ; and finally, money has been smit- 
ten by a pestilence, two-thirds of all that was there 
before the adoption of the constitution having 
already taken to itself wings, and showing no signs 
of returning. * * * 

"The general result has been that the proportion 
of personal property to the whole assessed value of 
property has steadily fallen from 50 per cent in 1861 
to 34 per cent in 1874, 26 per cent in 1880, and 13 1/2 
per cent in 1894. * * * While improvements 
upon land in San Francisco increased about one- 
third in six years, money fell ofl^ more than two- 
thirds, and other personal property nearly one-third. 
In the rest of the State, which is mainly agricul- 
tural, the value of improvements increased nearly 
one-half; personal property, other than money, in- 
creased nearly one-sixth; while the loss of money 
among the farmers, though severe, did not compare 
with the affliction which befell the capitalists of San 
Francisco. The general result was to reduce the 
share of San Francisco in the State tax from 40 
per cent to 30 per cent. In other words, the city 
paid 25 per cent LESS, and the farmers 16 2/3 per 
cent MORE. This result has continued ever since. 



256 The Problem of the Unemployed 

"According to unanimous testimony, the city of 
Boston is so fortunate as to possess a board of assess- 
ors in whose honesty and ability every one has confi- 
dence, and who are fanatical believers in the taxa- 
tion of personal property. These assessors are armed 
by law with almost despotic powers of search and 
with absolutely despotic powers of valuation. They 
can ransack every man's books; they can disregard 
all the evidence, when they have finished. After 
exhausting all their powers of inquiry, they are 
allowed to meet in secret, to go through a process 
of arbitrary assessment, fitly known by the name of 
'dooming.' Their return of details for the year 1889 
showed that the whole amount of taxable property, 
which they were actually able to discover, was 
$39,000,000, exclusive of bank stock. Being dissat- 
isfied with this estimate, which was all that was 
justified by any facts which they could state, they 
proceeded to multiply it four and a half times by a 
mere guess. In their dooming chamber they guessed 
that personal property, other than bank stock, ought 
to be valued at $186,000,000; and the citizens of 
Boston were compelled to pay taxes upon that 
amount. Could anything be more monstrous or more 
absurd than a system of taxation which, even when 
administered by phenomenally honest and compe- 
tent men, produces such results ? * * * Almost 
the whole of the things visible to Boston assessors 
consisted of merchandise and > machinery. Taxes 
upon these, of course, if equally distributed, simply 
increased the cost of goods to consumers, just as 
excise duties on whisky increases the cost of whisky 
to drinkers. But it is manifest, from the arbitrary 
increase made by the assessors, that these taxes 
were not equally distributed, and therefore one large 
section of taxpayers was robbed for the benefit of 
the other section. For unequal taxation upon pro- 
ducers makes it impossible for those who are taxed 
beyond their just share to recover such excess from 
their customers; while those who are taxed below 



Natural Taxation 257 

their share recover all which they have paid under 
strictly equal taxation. It follows that those who 
are taxed most are simply plundered, under forms of 
law, for the profit of their competitors who are taxed 
least. If Havemeyer and Spreckles were the only 
refiners of sugar, and both were taxed equally upon 
their production, both would recover the tax from 
their customers. But if Havemeyer should be taxed, 
while Spreckles went free, Spreckles could undersell 
Havemeyer, who would be practically robbed for 
Spreckles' benefit. * * * 

**In Illinois an even more drastic method prevails. 
A Board of Equalization, if of the opinion that the 
valuation of any county is too low, increases every- 
body's taxes fourfold, on the assumption that all 
have made false returns alike. Thus the conscien- 
tious taxpayer is made to feel that virtue must 
indeed be its own reward." 

The poorer classes, including the small farmer and 
the modest home owner in town or city, are those 
who suffer most from any maladjustment of the 
powers of government. For not only are the rich 
better able to stand the losses resulting from it, but 
it is easier for them to evade or ward off the ill 
effects of legislation which violates the natural law. 
This is nowhere more manifest than in matters of 
taxation. Thus, the buildings and improvements of 
small farmers and home owners in moderate circum- 
stances everywhere approach a certain degree of uni- 
formity, and the approximate value of improvements 
of this class is a matter of common knowledge. It 
is, therefore, difficult to under-appraise them for 
taxation. Not so, however, as regards the palaces 
of the rich and the immensely valuable improve- 
ments in the cities. Again, in the country, every 
one has more or less knowledge of his neighbor's 



258 The Problem of the Unemployed 

business, of the live stock which he owns and the 
amount of money which he may have loaned out, 
etc. This is not the case in cities and towns ; hence 
tax assessors in small places are more likely to list 
a greater percentage of personal property than in 
larger communities. In fact, experience shows that 
this is nearly always so, and the burden of this 
species of taxation falls with greater weight upon 
the country than upon the town, upon the man of 
small means than upon the man of large means. Not 
only so, but the man in moderate circumstances can- 
not afford, like the millionaire, to spend time and 
money, legitimately or otherwise, on tax assessors 
and boards of appraisement for the purpose of se- 
curing a small rendition and low assessment of his 
property. And so in every State in the Union, not- 
withstanding all kinds of legislation to prevent it, 
the greater a man's possessions in stocks and bonds 
and personal property generally, as well as in im- 
provements on land, the less in proportion are the 
taxes which he pays on property of this kind, com- 
pared with the man of moderate means. While the 
tax collector is som^etimes able to list thirty or forty 
per cent of the poor man's wealth in personal prop- 
erty and improvements he is compelled to let the 
rich man off on far better terms. 

As shown in previous chapters, a tax on economic 
rent, or, in other words, a tax on land alone, accord- 
ing to its value without reference to improvements, 
is a tax on privilege. It is merely the taking by the 
government of a portion of the tribute paid for the 
privilege of employment, which would otherwise go 
to individuals ; while a tax on the products of indus- 
try is, in effect, the levying of a fine on enterprise. 



Natural Taxation 259 

On the average, the more valuable the land the less 
valuable in proportion are the improvements which 
rest upon it. Thus in a sm.all place a mechanic puts 
up a thousand or fifteen hundred dollar house on a 
five hundred dollar lot, while in the best residence 
portions of a city the ground on which a handsome 
dwelling is built usually costs as much if not more 
than the building itself, and in the business districts 
this is almost invariably the case. In New York, 
for instance, as already mentioned, land values on 
Manhattan Island, exclusive of improvements, are 
assessed at $4,000,000,000, while improvem.ent val- 
ues are assessed at only about half that amount, and 
in that city there are comparatively few buildings 
which are as valuable as the land on which they 
stand. As to the farmer, the less valuable the land 
which he cultivates, the more valuable in proportion 
are the improvements and personal property upon 
it, including the value of the work done in reducing 
the land to cultivation. This is the rule when land 
in actual cultivation only is considered, but it cannot 
apply when much of the farmer's land is unim- 
proved, and when he is in fact more of a land specu- 
lator than a farmer. 

It is thus evident that every one whose personal 
property and improvements exceed the value of his 
land will be directly benefited by the transfer of 
taxes from the products of labor to land alone, or, 
in other words, by the remission of fines upon indus- 
try, and the consequent increase of taxes on privi- 
lege. That this would result in the reduction of the 
direct taxes of an overwhelming majority of the land 
owners of this country, including the farmers, is 



260 The Problem of the Unemployed 

clearly shown in the work on Natural Taxation 
already referred to.* 

Indirect taxes, such as those raised by means of a 
tariff on imported goods, and those levied through 
the internal revenue department of this country, are 
collected impartially from all consumers, rich and 
poor alike; but such taxes involve enormous waste, 
and bear with crushing weight upon the small prop- 
erty owner as well as upon the poor who have no 
property at all. The merchants who sell goods which 
have been taxed by this method must collect from 
the consumer not only the amount originally paid 
the government on the article taxed, but enough more 
to provide a profit for himself and for all who have 
previously handled it, on the additional outlay of 
capital thus required. This, like all attempts to tax 
wealth generally, has the effect of reducing the 
purchasing power of wages in this country 15 per 
cent or more.f In other words, if we could abolish 
indirect taxation and all taxes levied upon the prod- 
ucts of industry, without in any way shifting the 
burden upon consumers, the income of all workers 
would in effect be increased at least 15 per cent from 
this cause alone. 

Our present method of raising public revenues is 
well characterized by Mr. Shearman as "crooked 
taxation." It is crooked, because, while based in 
some instances on the theory apparently of making 
those who have the most pay the most, in practical 

*The subject of this chapter is so thoroughly and interest- 
ingly covered in Shearman's "Natural Taxation," that nothing 
more than a mere outline of the single tax will be attempted 
in this work. 

fSee Natural Taxation, Chapter II. 



Natural Taxation 261 

operation it compels every citizen, whether a prop- 
erty owner or not, to contribute to the support of 
the government, not according to his ability to pay, 
nor according to benefits received, but according to 
the number of mouths he must feed and the number 
of backs he must clothe. For the effect of all at- 
tempts to tax wealth is to increase the prices of 
things taxed, or the amount paid for the use of them. 
In the long run, and on the average, the consumer or 
the user reimburses the property owner for all taxes 
which the property owner pays on the things which 
the consumer uses or consumes. The tax on a build- 
ing, for instance, is taken into account in fixing the 
rent of the tenant, as much so as the cost of insur- 
ance, repairs and janitor service. As a general rule, 
an additional tenement will not be put up in any 
locality until the demand is strong enough to enable 
the owner to collect sufficient rent to cover taxes 
on the building as well as interest on the cost of it. 
Hence tenants pay the taxes assessed against tene- 
ment house improvements. So also, if it were pos- 
sible to tax credits with any degree of uniformity, 
rates of interest would rise, and users of capital 
borrowed would in effect pay the taxes levied against 
lenders. 

Not only is the present system of taxation crooked 
in that it enables those who in the first instance pay 
taxes on wealth to largely shift the burden upon 
those who must use or buy the articles taxed, but, in 
the very nature of things, such taxation falls with 
crushing effect upon the poor, as compared with its 
effect upon the rich. This is so because taxes must 
always be paid out of the taxpayer's possible savings. 
The average working man in the United States, 



262 The Problem of the Unemployed 

taking into account the time lost in involuntary idle- 
ness, earns less than $400 a year.* Of this amount 
he uses, say $395 for support of himself and family 
(little enough, surely), leaving possibly $5 a year 
to lay by for old age ! If no taxes were levied on the 
products of industry, i. e., on v^ealth, and if taxes 
were so levied that the burden could not be shifted, 
the laborer's income, and all incomes derived from 
labor, would, as shown by Mr. Shearman, be ad- 
vanced 15 per cent or more. In other words, the 
average working man could live just as comfortably 
then on $335 a year as he can now on $395. He 
could just as easily save $60 a year then as he can 
save $5 a year now. His possible savings would be 
increased twelve-fold. He could save money twelve 
times as fast. The burden of taxation at present, 
therefore, is so adjusted as to take eleven-twelfths 
or more of the possible savings of the average work- 
ing man, or nearly one-sixth of his entire income. 

When we think of the taxpayers of a community, 
we usually leave out of consideration the heaviest 
taxpayers of all, the people who own no taxable prop- 
erty. We lose sight of this truth, because of our 
crooked system of taxation; it is unwittingly, yet 
skillfully, arranged to increase the burdens of the 
poor to the benefit of the rich, without either rich or 
poor suspecting that such is in fact the case. 

Take another illustration: The direct taxes of a 
farmer worth $10,000, who has an income of $1,000, 
are, say, $100 a year. He can live comfortably on 
$800. His possible savings, therefore, amount to 
$200 annually, one-half of which is consumed in the 

*See "Natural Taxation"; also Carrell D. Wright's "Prac- 
tical Sociology." 



Natural Taxation 263 

payment of direct taxes; hence his net savings 
amount to $100 a year. He has a neighbor worth 
twice as much, or $20,000, whose direct taxes are 
therefore twice as great, or $200. Suppose this 
neighbor's income to be twice as great also, or $2,000 
a year. The neighbor can also live comfortably on 
$800 a year; his possible savings, therefore, are 
$1,200, of which $200, or only one-sixth, is consumed 
in the payment of direct taxes, and his net savings 
amount to $1,000 a year. The burden of direct taxa- 
tion upon the farmer worth $10,000 is therefore ten 
times as heavy as upon the farmer worth $20,000. 
The latter, although worth but twice as much, can 
live as well as the former and yet save ten times as 
much. And so, *'The destruction of the poor is their 
poverty." 

If these comparisons be extended so as to include 
incomes of a million dollars and upwards, it will be 
seen that the burden of taxation often bears upon 
the man with a small income a thousand and some- 
times ten thousand times heavier than upon million- 
aires and multi-millionaires. The result of this 
crookedness is to render it more difficult for the 
poor, and less difficult for the rich, to accumulate 
savings than would otherwise be the case. This to 
some extent explains the fact that while the number 
of those who have large fortunes is rapidly increas- 
ing in America, the percentage of the total popula- 
tion who have no taxable property at all is increas- 
ing much faster. 

It may be said in reply that an overwhelming 
majority of workingmen would continue to spend all 
they made as fast as made, no matter to what extent 
wages were advanced; but even so, a permanent 



264 The Problem of the Unemployed 

increase in the purchasing power of wages would 
nevertheless make it easier for thrifty workingmen 
to save. More therefore would save. The number 
of property owners would be increased and the foun- 
dations of good government would be broadened. 
At present extraordinary strength of character is 
necessary to enable one to support himself and fam- 
ily and save anything on $400 a year. The few who 
are thus endowed usually rise above their fellows 
and become employers and managers themselves. 
The causes of increasing discontent in the ranks, 
however, cannot be safely ignored simply because 
privates who deserve promotion have the chance 
of attaining it. 

Should the present ratio of increase of tenants on 
farms and in the cities and towns be maintained for 
a few decades longer, less than one per cent of the 
families of America will soon own the land on which 
the other ninety-nine per cent must live. It is evi- 
dent that the mildly restraining powers of a free 
government will be utterly incapable of coping with 
the forces of discontent which the house of Want 
will then marshal against the house of Have. And 
unfortunately this kind of discontent is intensified 
rather than alleviated by common schools and the 
spread of intelligence generally. Hence, just in pro- 
portion as we approach the conditions referred to, 
government by injunction, martial law and methods 
of like character will become more and more fre- 
quently necessary. A ^'strong government" must in 
the end appear, which will habitually ignore all con- 
stitutional guarantees of individual freedom. Was 
not something of this kind recently seen in Colorado ? 

It is evident that methods for raising the public 



Natural Taxation 265 

revenue, which waste so much in the collecting, 
which put a premium upon fraud and perjury, which 
impose fines upon industry, which shift the burden 
from the rich to the poor, and tend to steadily lessen 
the size of the property-owning class, cannot con- 
form to the natural law. But it is claimed in some 
quarters that there is no natural law pertaining to 
taxation ; that nature has given no intimation of any 
plan by which means for satisfying the increasing 
social or governmental wants of mankind can be 
obtained without waste, confusion and injustice. 
Can this be so when all human progress is the result 
of the effort of man to ascertain the natural law, be 
it moral or physical, and conform his actions to it? 
In no other way does he conquer nature ; in no other 
way can he conquer himself. 

Man's relation to his fellow-men, and to the land 
on which all must live, is such that government is 
necessary. It is necessary not only to prevent the 
strong from imposing upon the weak, but to enable 
man to rise above the tyranny of physical environ- 
ment and most effectively subject to his use the 
forces of the universe. Government, for instance, 
enables him to lay out and improve highways, with- 
out which he could never have risen from the savage 
state. It enables him to dot the seacoast with light- 
houses and life-saving crews, to warn the mariner 
and the farmer of approaching storms, to conserve 
life and health by public sanitary measures, and at a 
minimum of effort to provide means of education 
through public schools and means of communication 
through public mails. Government is necessarily 
something more than the big policeman, whose du- 
ties, it is claimed by the laissez faire school of econ- 



Z66 The Problem of the Unemployed 

omists, should end with the preservation of order. 
Government is in effect a great co-operative organ- 
ization, actively engaged even now in assisting men 
in the production of wealth. And it is more than 
probable that, with increase of intelligence and im- 
provements in morals, the functions of government 
will be largely extended, and an immense saving of 
human energy thus effected which would otherwise 
be wasted in misapplied efforts and senseless com- 
petition. 

To enable government to best serve the people in 
the constantly extending sphere of its activities, a 
constantly increasing revenue is necessary. Since 
this revenue is to be used for the benefit collectively 
of all the people, would not the ideal fund from which 
it should be drawn by taxation be a fund produced 
collectively by all the people? If there is such a 
fund, if taxes can be so adjusted as to be drawn 
entirely from it, would it not seem as though this 
fund had been created for this very purpose? 
Would not the natural law clearly indicate that this 
fund, produced by the common energy and enterprise 
of all, ought first to be used by the government for 
the benefit of all, before drawing from funds pro- 
duced by individual effort? 

In land values, we have in all respects a fund of 
the character above indicated. 

The value which a certain tract of land has, exclu- 
sive of all improvements on it, depends not on what 
its owner does, but upon what the people collectively 
do. If they settle around it and improve adjoining 
lands, they collectively create and bestow upon this 
particular tract additional values ; if they move away 
from it, if the population of the neighborhood de- 



Natural Taxation 267 

creases, the value of the land decreases also. And 
when public revenues are expended in its vicinity 
in the improvement of streets and highways, and in 
the maintenance of good schools and good govern- 
ment generally, the land is thereby directly enhanced 
in value. And as population and the needs of gov- 
ernment increase in any community, the land value 
fund of that community automatically increases in 
like proportion in accordance with an apparently 
preconceived plan to supply in this way a fund with 
which to meet the growing wants of government. 

If nature has decreed that the values attaching to 
land shall ultimately be appropriated by taxation for 
the common benefit of the people who in common 
create them, then none of the evils connected with 
attempts to tax wealth* which have been pointed out 
should flow from the taxation of land values. In 
point of fact, a tax on land alone, according to its 
value, and not in excess of economic rent, can never 
give rise to such evils. For such a tax is merely the 
appropriation by the government of tribute money 
which would otherwise be appropriated by indi- 
viduals. 

If we consider the effects which would result from 
levying all direct taxes on land values alone, we find 
that none of the objections which necessarily flow 
from all attempts to tax wealth would apply. In the 
first place, such a system of taxation would con- 
stantly tend to lessen instead of constantly tending 
to increase the burden of small property owners; 



*The meaning of wealth as used in this chapter and else- 
where in this work must not be confused with the broader 
popular definition of the word. 



268 The Problem of the Unemployed 

it would tend to distribute wealth among the many 
rather than to concentrate it among the few. 

Again, no taxpayer would have the slightest incli- 
nation to commit perjury. It would be impossible 
for him to conceal his land, and it would be useless 
for him to place any value upon it. The improve- 
ments on any particular tract of land not being con- 
sidered in determining its value, tax assessors and 
boards of appraisers would fix the values of all 
lands by reference to maps showing the location of 
the property, and without regard to the ownership 
of it. In fact, no other course would be possible, 
since excuses could not be trumped up for placing 
different values upon tracts in the same neighbor- 
hood having in fact the same value. Every prop- 
erty owner would be able to compare the valuation 
placed upon his own land with that placed upon his 
neighbor's, unembarrassed by questions relating to 
the value of improvements; hence almost absolute 
uniformity of taxation would be secured, and this, 
too, at a minimum of expense, since vast hordes of 
tax-gatherers and tax officials could be dispensed 
with.* 

Not one of the evils necessarily accompanying 
all attempts to tax wealth, to which attention has 
been called in the preceding pages, can be urged 
against the system of natural taxation referred to 
in this chapter. Not only would taxpayers be re- 
lieved from all attempts on the part of dishonest 
tax officials to extort blackmail, not only would 
unfair discriminations between individuals be ren- 



*Many progressive cities in the United States have already 
adopted this plan of assessing property under what is known 
as the "Somers System." 



Natural Taxation 269 

dered practically impossible, but no one would then 
be deterred by fear of increase of taxation from 
employing labor in putting improvements on land. 

Neither would there be any shifting of the burden 
of taxation ; consumers would reap the entire benefit 
in the reduction of prices, and tenants in the reduc- 
tion of rents. For instance, it costs less than 25 
cents a gallon to manufacture whisky, yet the article 
sells at wholesale for $1.75 a gallon and upwards. 
This difference between the cost of production and 
the price paid by the wholesale dealer results from 
the fact that whisky is taxed by the Federal Gov- 
ernment 90 cents a gallon. The consumer therefore 
pays this tax, together with the additional profit 
received by middlemen on account of the additional 
capital required, by reason of the tax, to handle the 
thing taxed. Can one doubt but that if the tax were 
removed, consumers would buy whisky for less than 
80 cents a gallon, instead of paying $1.75 and up- 
wards? It is thus evident that consumers, and not 
manufacturers and dealers, would reap the benefit 
of the exemption from taxation of personal prop- 
erty. 

It is equally clear that the renter, and not the 
land-owning landlord, would also in the long run 
obtain all the advantages resulting from exempting 
buildings and improvements on land from taxation. 
Take even the modern office building as an illustra- 
tion, which occasionally, though very rarely in large 
cities, exceeds in value the land which it occupies. 
At first thought one might conclude that owners of 
properties of this kind would reap the benefit, and 
not the tenants who occupy them. For the first 
year or two such might be the case, but the owners 



270 The Problem of the Unemployed 

of equally valuable unimproved or but partially im- 
proved lots in the same neighborhood could not afford 
to have their taxes doubled, without any increase 
of income from the property taxed, as would be the 
case if no taxes were levied on improvements and 
personal property. They would, therefore, be com- 
pelled to put up improvements themselves of a char- 
acter suitable to the locality. There being no taxes 
on buildings, it costing no more to hold a tract of 
land with a suitable improvement on it than to hold 
it in partial or absolute idleness, land owners would 
respond more quickly than under present conditions 
to an increased demand for tenements. Competition 
among landlords for tenants would therefore reduce 
rents.* 

Reflection will satisfy the reader that a tax on land 
values cannot be shifted, so long as it does not exceed 
the economic rent of the land; that it is always a 
straight tax, and never a crooked one ; that it must 
always be paid by the land owner in the end, and 
never by any one else. This is so, because it is an 
appropriation by the government of a portion of 
the economic rent, or a portion of the increase in the 
value of land, which would otherwise be appropri- 
ated by the land owner. A tax on buildings increases 
the amount which must be paid for the use of them ; 
a tax on money or on credits (if it could be collected) 
would increase rates of interest ; a tax on food, cloth- 
ing, or any other article of consumption, increases 
its cost to the consumer; but a tax on land values 
has just the opposite effect, it simply makes land 
cheaper. It increases the difficulty of holding land 

*See pages 206 and 207. 



Natural Taxation 271 

in idleness ; and if the tax were gradually increased 
this difficulty would be gradually increased also, 
until the time would finally come when all idle land 
would be free land ; and hence the paradox that the 
wealthy would be the least benefited by abolishing 
taxes on wealth. 



APPENDIX. 

THE RIGHT TO THE USE OF THE EARTH. 

THE following is from the first edition of Mr. 
Herbert Spencer's ''Social Statics,'' Chapter 
IX, on "The Right to the Use of the Earth":* 

"1. Given a race of beings having like claims to 
pursue the objects of their desires — given a world 
adapted to the gratification of those desires — a world 
into which such beings are similarly born, and it 
unavoidably follows that they have equal rights to 
the use of this world. For if each of them 'has 
freedom to do all that he wills, provided he infringes 
not the equal freedom of any other,' then each of 
them is free to use the earth for the satisfaction of 
his wants, provided he allows all others the same 
liberty. And conversely, it is manifest that no one, 
or part of them, may use the earth in such a way as 
to prevent the rest from similarly using it; seeing 
that to do this is to assume greater freedom than the 
rest, and consequently to break the law. 

"2. Equity, therefore, does not permit property 
in land. For if one portion of the earth's surface 
may justly become the possession of an individual, 
and may be held by him for his sole use and benefit, 
as a thing to which he has an exclusive right, then 
other portions of the earth's surface may be so held ; 
and eventually the whole of the earth's surface may 
be so held ; and our planet may thus lapse altogether 
into private hands. Observe now the dilemma to 
which this leads. Supposing the entire habitable 

♦This chapter was omitted in the subsequent editions of 
"Social Statics." 



274 Appendix 

globe to be so enclosed, it follows that if the land 
owners have a valid right to its surface, all who 
are not land owners have no right at all to its surface. 
Hence, such can exist on the earth by sufferance only. 
They are all trespassers. Save by the permission of 
the lords of the soil, they can have no room for the 
soles of their feet. Nay, should the others think fit 
to deny them a resting place, these landless men 
might equitably be expelled from the earth alto- 
gether. If, then, the assumption that land can be 
held as property involves that the whole globe may 
become the private domain of a part of its inhab- 
itants ; and if, by consequence, the rest of its inhab- 
itants can then exercise their faculties — can then 
exist even — only by consent of the land owners; it 
is manifest, that an exclusive possession of the soil 
necessitates an infringement of the law of equal 
freedom. For men who cannot 'live and move and 
have their being' without the leave of others, cannot 
be equally free with those others. 

*'3. Passing from the consideration of the possi- 
ble to that of the actual, we find yet further reason 
to deny the rectitude of property in land. It can 
never be pretended that the existing titles to such 
property are legitimate. Should any one think so, 
let him look in the chronicles. Violence, fraud, the 
prerogative of force, the claims of superior cun- 
ning — these are the sources to which those titles 
may be traced. The original deeds were written 
with the sword, rather than with the pen ; not law- 
yers, but soldiers, were the conveyancers; blows 
were the current coin given in payment; and for 
seals, blood was used in preference to wax. Could 
valid claim be thus constituted? Hardly.. And if 
not, what becomes of the pretensions of all subse- 
quent holders of estates so obtained? Does sale or 
bequest generate a right where it did not previously 
exist ? Would the original claimants be nonsuited at 
the bar of reason, because the thing stolen from 
them had changed hands? Certainly not. And if 



Appendix 275 

one act of transfer can give no title, can many? 
No ; though nothing be multiplied forever, it will not 
produce one. Even the law recognizes this prin- 
ciple. An existing holder must, if called upon, 
substantiate the claims of those from whom he pur- 
chased or inherited his property; and any flaw in 
the original parchment, even though the property 
should have had a score of intermediate owners, 
quashes his right. 

" *But Time,* say some, *is a great legalizer. Im- 
memorial possession must be taken to constitute a 
legal claim. That w^hich has been held from age 
to age as private property, and has been bought and 
sold as such, must now be considered as irrevocably 
belonging to individuals.* To which proposition a 
willing assent shall be given when its propounders 
can assign it a definite meaning. To do this, how- 
ever, they must find satisfactory answers to such 
questions as, How long does it take for what was 
originally a wrong to grow into a right? At what 
rate per annum do invalid claims become valid? If 
a title gets perfect in a thousand years, how much 
more than perfect will it be in two thousand years ? 
— and so forth. For the solution of which they will 
require a new calculus. 

"Whether it may be expedient to admit claims of 
a certain standing, is not the point. We have here 
nothing to do with the considerations of conventional 
privilege or legislative convenience. We have simply 
to inquire what is the verdict given by pure equity 
in the matter. And this verdict enjoins a protest 
against every existing pretension to the individual 
possession of the soil ; and dictates the assertion that 
the right of mankind at large to the earth's surface 
is still valid; all deeds, customs and lav/s notwith- 
standing. * * * 

"9. No doubt great difiiculties must attend the 
resumption, by mankind at large, of their rights to 
the soil. The question of compensation to existing 
proprietors is a complicated one — one that perhaps 



276 Appendix 

cannot be settled in a strictly equitable manner. 
Had we to deal with the parties who originally- 
robbed the human race of its heritage, we might 
make short work of the matter. But, unfortunately, 
most of our present landowners are men who have, 
either mediately or immediately — either by their 
own acts, or by the acts of their ancestors — given 
for their estates equivalents of honestly earned 
wealth, believing that they were investing their sav- 
ings in a legitimate manner. To justly estimate and 
liquidate the claims of such, is one of the most intri- 
cate problems society will one day have to solve. 
But with this perplexity and our extrication from 
it, abstract morality has no concern. Men having 
got themselves into the dilemma by disobedience to 
the law, must get out of it as well as they can ; and 
with as little injury to the landed class as may be. 

"Meanwhile, we shall do well to recollect that there 
are others beside the landed class to be considered. 
In our tender regard for the vested interest of the 
few, let us not forget that the rights of the many are 
in abeyance, and must remain so, as long as the earth 
is monopolized by individuals. Let us remember, 
too, that the injustice thus inflicted on the mass of 
mankind is an injustice of the gravest nature. The 
fact that it is not so regarded proves nothing. In 
early phases of civilization even homicide is thought 
lightly of. The suttees of India, together with the 
practice elsewhere followed of sacrificing a hecatomb 
of human victims at the burial of a chief, shows 
this ; and probably cannibals consider the slaughter 
of those whom *the fortune of war' has made their 
prisoners, perfectly justifiable. It was once also 
universally supposed that slavery was a natural and 
quite legitimate institution — a condition into which 
some were born, and to which they ought to submit 
as to a Divine ordination ; nay, indeed, a great pro- 
portion of mankind hold this opinion still. A higher 
social development, however, has generated in us a 
better faith, and we now, to a considerable extent, 



Appendix 277 

recognize the claims of humanity. But our civiliza- 
tion is only partial. It may by-and-by be perceived 
that Equity utters dictates to v^hich we have not 
yet listened ; and men may then learn that to deprive 
others of their rights to the use of the earth, is to 
commit a crime inferior only in wickedness to the 
crime of taking away their lives or personal liberties. 
"10. Briefly reviewing the argument, we see that 
the right of each man to the use of the earth, limited 
only by the like rights of his fellow-men, is imme- 
diately deducible from the law of equal freedom. 
We see that the maintenance of this right necessarily 
forbids private property in land. On examination 
all existing titles to such property turn out to be 
invalid; those founded on reclamation inclusive. It 
appears that not even an equal apportionment of 
the earth amongst its inhabitants could generate a 
legitimate proprietorship. We find that if pushed 
to its ultimate consequences, a claim to exclusive 
possession of the soil involves a land-owning despot- 
ism. We further find that such a claim is constantly 
denied by the enactments of our legislature. And 
we find lastly, that the theory of the co-heirship of 
all men to the soil is consistent with the highest 
civilization ; and that, however difficult it may be to 
embody that theory in fact, Equity ster? ly com- 
mands it to be done." 



INDEX 

Alabama: Effect of discovery of coal in, 148. 

Agriculture: Wages as standard, 83. 

Bellamy: Vision of, 245. 

Boston: Public OwnershiiD in, 243. 

Capital: Definition, 22; Relation to wages, 23; First appear- 
ance of, 32; Labor saving machinery and, 54; 
Labor's dependence on, 127; Free land and, 127; 
Wealth and, 143; Clark's treatment of, 179; In 
new countries, 181; Struggle between labor and, 
190; Nationalization of land and, 216. 

California: "Boom" in, 118; Taxation in, 254; Wages at the 
time of placer mining in, 174. 

Carlyle, Thomas: 116. 

Census: As to tenant farm^ers, 7; per capita wealth, 7; of 
1850 and 1910, 63; as to wealth and population, 
214; Massachusetts, 137. 

Charity: Effect on rent, 169. 

Chicago: School land in, 200. 

Clark, John B.: Treatment of capital, 179. 

Clay, Henry: Tariff and labor, 108. 

Coal Mines: As wealth, 18; Under nationalized land condi- 
tions, 233; Of Alabama, 148. 

Compensation to Landlords: Ethics of, 222; In Ireland, 223. 

Consumption of Wealth and Over-production, 87. 

Copyright: As wealth, 14. 

Dickens, Charles: American notes, 108. 

"Effort": Defined, 174; Labor unions and individuals, 238. 

Egyptian Tax on Olive Trees, 248. 

"Enfield": Parish of, 45. 

England: Poverty in, 7. 

Fairbanks, Ex- Vice President: As to wages, 59. 

Fetter, Frank A.: Ownership of wealth in the U. S., 7. 

George, Henry: Malthusian theory and, 79. 

Ghent, Mr.: "Benevolent feudalism," 115. 

Havemeyer, Henry: Trusts and, 241. 

Idleness: Involuntary, 69. 



Index 

Improvement; On land as wealth, 18; Effect of improvements. 
Chap. V; Labor saving, 53; Labor saving and in- 
terest, 54; And wages, 55. (See Labor.) 

"Independent, The": Extract, 114. 

India: Famine, 78. 

Indian Terpjtoey: Opening reservation in, 86. 

Interest: Definition, 29; Nature of. Chap. Ill; First appear- 
ance of, 32; Necessity of interest, 34; On money, 
38; As deferred wages, 39; Rent and, 42; In New 
York City, 55; Free land and, 125, 181; Rate in 
U. S., England and New Zealand, 182. 

Interstate Railroad Commission, 184. 

Ireland: Compensation to land owners, 223. 

Japan: Land in cultivation, 76; Density of population, 137. 

Kansas: Government ownership, 244. 

Labor: Definition, 24; Effort not labor, 53; Scarcity of, 71; 
Temporary scarcity of, 72 ; Effect of unemployed 
on employed, 74; Free land and, 80; In agri- 
cultural pursuits, 83; Wakefield and labor in 
U. S., 109; Dependence on capital, Chapter X; 
Struggle with capital, 188; Under nationaliza- 
tion of land, 216. (See Wages.) 

Laborer: Efficiency of and wages, 5; Standard of living, 71. 

Labor Saving Inventions: Effect of, 54; On land and wages, 
54; On interest, 56; On land, 56, 113; Wealth 
producing power today, 62; Effect of on rent, 
167; Wages, 74; Under natural laws, 194; On 
free land, 239. 

Land: Definition, 20; Wealth produced on, 20; Private owner- 
ship of, 42; Title to, 44; Labor saving inventions 
and, 56; Cheap land and wages, 74; Real 
scarcity of and employment, 76 ; In England and 
Greater New York, 76; Mormons and land, 80; 
In suburbs, 84; Wealth in purchase of, 95; 
Speculation in, 97; Prohibitive price of, 97: 
Cheap land and wages, 108; New Zealand land 
laws, 110; Increase of population and, 120; 
Wealth in land not capital, 151; Economic rent 
of, 161; Free land in U. S., 174; In England, 
175; In Siberia, 177; In Europe, 177. 

Law: Diminishing returns, 79, 108; New Zealand land laws, 
110; Malthus, 79, 109; Supply and demand, 40, 
111, 185, 206; Wages, 170, 113, 239; Rent, 161, 
239. 

Macaulay, Lord: To H. S. Randell, 211. 

Malthus: Theory of, see Law. 



Index 

MiNEEAL DEjPOSITS AS WEALTH, 18. 

Money: Definition of, as wealth, 15. 

Monopoly: Genuine, 183. (See Trusts.) 

Nationalization of Land — (See next page.) 

New York City : Unused land in, 77 ; Tenement district, 102 ; 
suburbs, 104; Wharfage privilege, 233; Land 
values in, 259. 

New Zealand: As to land, 110; Per capita tax, 215; Methods 
as to arbitrary prices, 243. 

Nationalization of Land: Cost of, 214; How accomplished, 
213; Effect on land values, 227; On improve- 
ments, 228; On mineral deposits, 233; Upon in- 
vestments of wealth, 236. 

Oklahoma: Opening of, 119. 

Ownership op Land: Private, 42; Government, 196; Security 
of property under, 200. 

"Outlook, The": Extract from, 238. 

Panics: Cause of, 97. 

Political Economists and Private Ownership of Land, 129; 
Teachings of New School, 195. 

Political Freedom and Industrial Slavery, 195. 

Population: Density of, 137. (See Land.) 

Privileges: Special. As wealth, 14. 

Production: Over, 86. 

Prosperity: Definition of, 98. 

Rent: Definition, 26; Law of supply and demand, 43; Labor- 
saving inventions and, 64, 193; Economic rent, 
161, 198, 203; Charity and rent, 169; Under na- 
tionalization of land, 203. 

Ricardo: Law of wages, 239. 

Robinson Crusoe: Example, 187. 

Rogers, Thorold: Six centuries of work and wages, 60. 

Shearman, Thomas G.: Natural taxation, 200, 251, 260. 

Siberia: Free land in, 177. 

Socialism: Vision of Bellamy, 245, 129; Government owner- 
ship, 194, 242. 

Spencer, Herbert: "Right to the Use of the Earth"; Ap- 
pendix. 

Stock: Shares of, as wealth, 14. 

Tariff, Protective: Argument for, 108, 241. 

Tax: Assessment of New York City, 22; Land tax of New 
Zealand, 110; Under nationalization of land, 
200; Window tax, 248; Indirect, 260. (See 
Thomas Shearman.) 



Index 

Taxation: Present condition of, 200, 208; Per capita in U. 
S., 215; Natural taxation. Chapter VII; Egyp- 
tian government tax, 248; Russian, 248; On 
improvements, 250; Gibbons' Roman, 252; Tax 
assessors, 253; California, 254; Burden of, 257; 
Of privilege, 258. 

Tenants: Increase of, 7. 

Texas: Unused land in, 224. 

Wages: Definition, 29; EflEiciency and, 5; Labor saving in- 
ventions and, 57; In the Fifteenth Century, 59; 
Effect of unemployed laborers on, 73; Cheap 
land and, 74; Trade unions and, 136; Law of, 
113; Free land and, 174; Tariff and, 183; Em- 
ployers, 182. (See Labor.) 

Wakefield, E. Gibbons: On labor in America, 109; Theory 
in Russia, 177. 

Wealth: Definition, 13; Money as, 15; Improvements on 
land as, 18; Mines as, 18; Production of, 50; In 
U. S. per capita, 63; Division of, 67; Invest- 
ment of, 94, 123; In land for speculation, 94; 
Of farmer, 130; Capital and, 143; Produced on 
non-agricultural lands, 159; Distribution of, 
Chapter XII. 

Work: As a fixed quantity, 88; Effect of lower wages on, 90. 

Wright, Carroll D.: As to hours of labor, 59; On employ- 
ment, 72. 



